2. Essential Question How much of a good or service should a business produce?

3. Labor and Output Marginal product of labor – the change in output from hiring one more worker

4. Labor & Output Increasing marginal returns – the marginal product of labor increases as the number of workers increases Diminishing marginal returns – the marginal product of labor decreases as the number of workers increases.

5. Marginal Product of Labor Labor (number of workers) Output (beanbags per hour) Marginal product of labor 00- 144 2106 3177 4236 5285 6313 7321 831

6. Marginal Returns

7. Production Costs Fixed Cost – cost that does not change, no matter how much of a good is produced. – Ex. Rent, salaries, machine repairs Variable Costs – Costs that rise or fall depending on the quantity produced. – Ex. Electricity, heat

8. Production Costs Total costs = fixed costs