Diminishing Marginal Productivity and the Supply Curve

Diminishing Marginal Productivity and the Supply Curve Student’s Name Institution Course # and Name Professor’s Name Submission Date Law of Diminishing Marginal Productivity Bach et al. (2019) explain that in dairy production, a law of diminishing marginal product exists because attempts at increasing the yield within a level have a domino effect of higher nutrient inputs, which sometimes counteracts profitability due to the limiting effect of higher costs. Simplified, it means that while milk yield increases, its marginal products gradually require increased nutrient supply, which may reach a point beyond which costs outweigh benefits and decrease profits in their entirety. Therefore, using the scenario of production of dairy, diminishing marginal productivity refers to the fact that as extra input units are incorporated into the production process, the extra (i.e., marginal) output from the respective additional units will ultimately drop. Why The Law of Diminishing Marginal Productivity Tends to Hold in The Short Run The law of diminishing marginal productivity, or the law of diminishing returns, is liable to hold in the short run because at least one factor of production is fixed. Market structure and worker heterogeneity are some major factors in determining workers' marginal productivity, which, in turn, is usually key to labor demand (Azid et al., 2021). It also shapes business decisions and inter-firm co...