Economics Part A

The Meaning and Proper Use of Marginal Output

The term marginal output describes the value in production of every additional employee that a firm hires. Let’s assume that the marginal output per new worker is as follows:

Rank

Number of Chairs Produced Per Day

First worker

10 Chairs

Second worker

9 Chairs

Third worker

8 Chairs

Fourth worker

7 Chairs


Given these facts, the marginal output for the various employees is as follows:

  • The marginal output of the first worker is 10 chairs.
  • The marginal output of the second worker is 9 chairs.

  • The marginal output of the third worker is 8 chairs.

  • The marginal output of the fourth worker is 7 chairs.

When the term marginal output is used without mentioning a specific employee or a ranking, then the term always refers to the last employee hired. In this example, it refers to the fourth worker.

The Meaning and Proper Use of Marginal Output-1

The Meaning and Proper Use of Marginal Output535The Meaning and Proper Use of Marginal Output