2. Cost of Production Chapter 5 Section 2

3. As a business –Ask yourself how many workers do I hire? –Marginal product of labor Change in output for hiring one more worker WorkersOutputMarginal Profit of Labor 00- 144 2106 3177 4236 5285 6313 7321 831

4. Adding workers adds to specialization –Specialization leads to Increasing Marginal Returns (output) –Fourth person is added what happens? –Diminishing Marginal Returns Working with limited capital less gets done WorkersOutputMarginal Profit of Labor 00- 144 2106 3177 4236 5285 6313 7321 831

5. Production Costs –Fixed Cost – stays fixed rent, property taxes, salaries –Variable Cost – rise and fall depending on the amount produced Cost of labor, electricity and heating bills –Total Cost – fixed + variable

6. Marginal Cost – additional cost of producing one more unit