## MP vs MC curve

If the MPL (Marginal Product of Labor) is low , then the firm needs to hire many extra workers to produce 1 additional unit of output so the MC (Marginal cost) is high .

*Proof:*

Assume that the price of an additional labour is $100 (PL) and he can produce extra 5 units of output (MP). Thus the additional cost of producing extra one unit of output (MC) is $20 (PL/MP).

## AP vs AVC curve

If the APL (Average Product of Labor) is low, then the firm needs to hire many workers to produce each unit of output so the AVC is high.

*Proof:*

Assume that 200 units of output are produced by 40 workers. This means each worker produces 5 units of output (Q/L). If the price of labor is $100 per worker, the average cost of producing one unit of output is $100 / 5 (PL/AP), which equals $20.

## Comments