MP curve cuts AP from above, when AP increases, MP is greater than AP and when AP decreases, MP is less than AP. AP is equal to MP only when the AP is constant from above the MP curve. Thus, MP curve cuts the AP curve from above.
At which point of the AP curve is AP MP?
At the highest point of AP, i.e. when AP is at its maximum, MP is equal to AP. When MP becomes lesser than AP, AP also starts to fall. Thereafter, both AP and MP fall, but MP becomes negative and AP remains positive.
What happens when MP cuts AP at its highest point?
When AP is maximum, MP is equal to AP.
Why does MP always intersect AP at the top of the AP curve?
Therefore, MP intersects the AP curve at the maximum AP. The intuitive explanation for the relationship between MP and AP is that MP represents the contribution of an additional worker. If that worker adds more to total output than the average, then the average is pulled up.
What is MP curve?
MP curve. The MP curve displays a positive relationship, upward-sloping curve, where the real interest rate is located on the vertical axis and inflation rate on the horizontal axis. Shifts on the MP curve are produced by actions of the Federal Reserve.
What is the marginal product curve?
The marginal product (MP) curve reflects changes in total product (TP) and is drawn using the same horizontal axis. You can draw the marginal product curve below the total product curve using the same horizontal axis. Because the MP curve is derived from the TP curve, it reflects the information in the TP curve.
What is the maximum point of TP?
The maximum point of TP is when MP becomes zero.
How is the MP curve related to the AP curve?
The upcoming discussion will update you about the relationship between marginal and average product curves. In Fig. 6.2 (b) we can see that the MP curve cuts the AP curve at the latter’s maximum point.
What happens when MP is above or below AP?
Since AP slopes upwards or downwards, depending on whether MP is above or below AP, it follows that MP must equal AP at the highest point on the AP curve; when AP is falling, MP is below AP, pulling it down.
Which is the aggregate of marginal products AP or MP?
Since AP is the aggregate of marginal products, it also increases. However, it is less than MP. After a point, MP starts decreasing. As long as the value of MP is greater than the value of AP, AP continues to increase. Once MP decreases sufficiently, its value becomes less than AP.
Is the maximum of MP always positive or negative?
Note that the maximum of MP is reached at the point where TP starts to increase at a diminishing rate. An interesting fact is that MP can also be negative, whereas TP is always positive even when it declines. The AP curve also shows a similar trend as the MP. It rises, reaches its maximum and then falls.
