Labor Curves

Since we now understand the basics of cost curves, it’s worth learning about labor curves. To start, the marginal product of labor (MPL) – the same as marginal physical product – is the change in output produced by one additional worker. Average product of labor (APL) is the total output divided by the number of workers.

Source: Study.com

It looks like MPL is an upside-down MC and APL is an upside-down ATC! You can definitely think of it that way. The shape of labor curves have a lot of the same reasons behind them as that of cost curves. When MC decreases due to specialization, MPL increases. Once APL starts decreasing, AVC begins to increase. As a firm grows, it can also buy inputs in bulk to cut average costs. Over time, though, these benefits wear out. The technical reason for the exhaustion of benefits with increases in labor quantity is because it is harder to manage a large workforce. Also, employee morale theoretically decreases as a company gets larger, which means that workers become less productive.