The correct answer is D. Marginal product is the increase in output that arises from an additional unit of input. It is calculated by dividing the change in output by the change in input. For example, if a company produces 100 units of output with 10 workers and then produces 110 units of output with 11 workers, the marginal product of labor is 10.
Marginal product can be positive, negative, or zero. It is positive when the additional unit of input results in an increase in output. It is negative when the additional unit of input results in a decrease in output. And it is zero when the additional unit of input has no effect on output.
Marginal product is an important concept in economics because it helps to determine the optimal level of production. A company should produce up to the point where the marginal product of labor is equal to the wage rate. This is because the company will make the most profit by producing at the point where the additional revenue from selling an additional unit of output is equal to the additional cost of producing that unit of output.
Here is a brief explanation of each option:
- A. Economic Profit = Total Revenue – Total Cost, including both explicit and implicit cost. Economic profit is the difference between a firm’s total revenue and total cost, including both explicit and implicit costs. Explicit costs are the costs that a firm incurs in order to produce its goods or services, such as the cost of labor, materials, and equipment. Implicit costs are the costs that a firm incurs in order to use its resources, such as the opportunity cost of capital.
- B. Accounting Profit = Total Revenue – Total Explicit Cost. Accounting profit is the difference between a firm’s total revenue and total explicit cost. It is the profit that is reported on a firm’s financial statements.
- C. Marginal Product – The increase in output that arises from an additional unit of input. Marginal product is the increase in output that arises from an additional unit of input. It is calculated by dividing the change in output by the change in input.
- D. Marginal Product – The decrease in output that arises from an additional unit of input. This is incorrect because marginal product is the increase in output that arises from an additional unit of input, not the decrease in output.