Marginal Product and Average Product

The average and marginal product curves will tend to increase at first and then fall due to increasing and diminishing returns.

Diagram: Marginal Product and Average Product

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The average product is the output produced per unit of the variable factor and the marginal product is the extra output produced when one more unit of the variable factor is employed. Initially in the short run there will be increasing returns as the combination of factors becomes more efficient. However, eventually there will be diminishing returns and the average and marginal product will decline.