![]() ![]() Between 3 and 4, the average height is 10. Multiply 15, so this height, the average height is 15. What's the marginal product revenue we get going from 2 to 3 people? Well, the average height here, we'd essentially just say, "What is the area between 2 and 3?" And we can figure out that area by saying, "Well the average height, The average height is 15. ![]() Likewise, the area under the curve, if we want to say how much. So the area under theĬurve right over there is going to be 20. The area is 1 times 20, and that's also going to be the same as the area under the curve. Marginal product revenue going from 1 to 2 people is $20. Of people per hour is 1, and then our average Now, how much benefit do they get going from 1 to 2 people? Well, going from 1 to 2, our change in quantity That's essentially how much benefit the firm is getting from hiring, from going from 0 to 1 person. So $25 is also the area, is also the area under this curve. The orange curve, between 0 and ½ is above this rectangle and between ½ and one, it is below the rectangle. To fully appreciate it, but I think you can lookĪt it geometrically, that also happens to be, given that this is a line, that our curve, our marginal product revenue is a line right over here, that the area under this rectangle is going to be the same thing as the area under the orange curve. Now, and you would really have to do a little bit of calculus Marginal product revenue, which is 25, so that would give us theĪrea of this rectangle right over there, which would be $25. ![]() We got from this person right over here, the total incremental revenue that this is allowing us to get, well, it's the one person times the average Out what's the total marginal revenue that Go from 0 to 1 person, we are getting $25 of value, or $25 of marginal revenue Shows up every ten days? Then you get a little lessīenefit as you get closer and closer to a whole person per hour. You might say, how do I get a tenth of a person? Well, what if one person The reason why I said it that way, is you could imagine a reality where getting a tenth of a person, you get a value higher than 25. What we could do is weĬould multiply the quantity of people, which is 1, times the average, times the average increment, the average marginal product revenue that we get from 1 person, or I should say, the average we get going from 0 to 1 person, and the average is 25. Told us right up here, we can think about what is the marginal, how much incremental revenue do we get from hiring that 1st person. Telling us the same thing visually that this table That you're getting per person, per hour. And the vertical axis here, the marginal product revenue, that you could view as the marginal dollars, or the incremental dollars Horizontal axis here, this is a quantity of labor per hour, so this is people per hour that are working at the firm. Also, how we can use this to think about what's a rational number of people for this firm to hire? Just as a reminder, this Voiceover: What i want to do in this video is dig a little bit deeper in this marginal product revenue curve, and really make sure we understand what it's telling us, that it really is the ![]()
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