What is the relationship between marginal product and marginal cost?

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BlackTom AI · Accepted Answer

To evaluate the relationship between marginal product (MP) and marginal cost (MC), let's examine what each term means and how they interact in production.
Option a: 'As marginal product rises, marginal cost does too.' This would imply that increasing output efficiency (higher MP) raises the cost of producing an additional unit, which contradicts the intuition that more productive marginal units should cost less to produce. Therefore this option is incorrect.
Option b: 'Positive relationship.' A positive relationship would mean MP and MC move in the same direction. Since higher MP means you get more output per unit of input, the additional cost per extra unit tends to fall, not rise. This makes MC lower when MP is higher, so this option is not accurate.
Option c: 'No relationship.' In reality, MP and MC are linked through the cost of producing an extra unit: MC is roughly the inverse of MP when considering a single input and short-run cost conditions. Saying there is no relationship ignores this fundamental connection, so this option is incorrect.
Option d: 'Inverse (negative) relationship.' When MP increases, the additional output obtained from an extra unit of input is larger, so you need less cost per extra unit produced, leading to lower MC. Conversely, when MP falls, MC rises. This inverse relationship aligns with typical production theory where MC ≈ w/MP (for a fixed input price w). Therefore this option correctly captures the relationship.
Putting it together, the inverse (negative) relationship described in option d is the correct characterization of how marginal product and marginal cost interact. The other options misstate or ignore the established inverse linkage between MP and MC.

MUF0061 Economics Unit 1 - Semester 2, 2025 Revision Quiz: Marginal Cost, Average Cost and Economies of Scale (5 - 10 minutes)

What is the relationship between marginal product and marginal cost?

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