Production with One Variable Input 193vary the size and scale of its plant, whereas in the short run the size of this plant
would be fixed at its existing capacity. If a firm operates under restrictive, long-
term labor contracts, its ability to vary its labor force may be limited over the
contract duration, perhaps up to three years. In this case, labor could be a fixed
input in the short run.MARGINAL PRODUCT Let’s consider the production decisions of the auto
parts firm. Currently it is operating with a 10,000-square-foot plant. In the short
run, this capital input is fixed. However, labor is a variable input; that is, the
firm can freely vary its number of workers. Table 5.2 shows the amount of out-
put obtainable using different numbers of workers. (This information is repro-
duced from the earlier production function and expanded slightly.) Notice
that output steadily increases as the workforce increases, up to 120 workers.
Beyond that point, output declines. It appears that too many workers within a
plant of limited size are counterproductive to the task of producing parts.TABLE 5.2
Production of Specialty
Parts (10,000-Square-
Foot Plant)The second column
shows the amount of
total output generated
by different amounts
of labor. The third col-
umn shows the mar-
ginal product of
labor—the extra out-
put produced by an
additional worker.Number of Total Marginal
Workers Product Product
10 93
4.2
20 135
4.5
30 180
5.0
40 230
3.3
50 263
3.0
60 293
2.8
70 321
2.5
80 346
2.2
90 368
2.0
100 388
1.2
110 400
0.3
120 403
1.2
130 391
1.1
140 380c05Production.qxd 9/5/11 5:49 PM Page 193