Diminishing Marginal Product and it’s a characteristic of production in the short run. Diminishing marginal

productivity is very similar to the concept of diminishing marginal utility that we learned about in the chapter

on consumer choice. Both concepts are examples of the more general concept of diminishing marginal

returns. Why does diminishing marginal productivity occur? It’s because of fixed capital. We will see this more

clearly when we discuss production in the long run.

We can show these concepts graphically as Figure 7.5 and Figure 7.6 illustrate. Figure 7.5 graphically shows

the data from Table 7.2. Figure 7.6 shows the more general cases of total product and marginal product curves.

FIGURE 7.5

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7.3 • Costs in the Short Run 165

FIGURE 7.6

7.3 Costs in the Short Run

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Understand the relationship between production and costs
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