Total, Average, and Marginal Product of Labor

Total product (Q)

The aggregate sum of production for a firm during a time period. Usually illustrated as the total output (Q) using labor quantity (L)

Average product

Total product divided by the quantity of a given input. (AP_L = Q/L)

Marginal product

The amount of additional output resulting from using one more unit of input assuming other inputs are fixed. (MP_L  = ΔQ/ΔL)

[Practice Problems] The manager of a small manufacturing firm gathers the following information about the firm’s labor utilization and production:

[Practice Problems] Refer to the data in the exhibit. The number of workers resulting in the highest level of average product of labor is closest to:

A. 3.

B. 4.

C. 5.

[Solutions] A

Three workers produce the highest average product equal to 170.

AP = 510/3 = 170.

[Practice Problems] Refer to the data in the exhibit. The marginal product of labor demonstrates increasing returns for the firm if the number of workers is closest to but not more than:

A. 2.

B. 3.

C. 4.

[Solutions] B

Marginal product is equal to the change in total product divided by the change in labor. The increase in MP from 2 to 3 workers is 190:

MP = ΔTP/ΔL = (510 – 320)/(3 – 2) = 190/1 = 190.