 Hi, this is Professor Gerald Friedman, Department of Economics at the University of Massachusetts. I'm here to talk about marginal productivity, marginal cost, and growing pot in your bathtub. They do that on Weeds TV show. I don't recommend you do it, don't try this at home. But just in case you did, you might think about how can you increase the output of your pot farm? Well, you're a strawberry farm or whatever business you're operating. To increase output, I'm talking about from one day to the next, you can't add bathtubs, you can't add greenhouses, you can't add acreage, but you can hire more workers. You increase output by hiring more variable inputs. I put in quotation marks because what is variable depends on the time horizon. In the immediate short run, variable includes labor, maybe water, maybe fertilizers. It does not include machinery, land, et cetera, buildings, et cetera. Now the first workers you bring in, maybe, let's say you have a strawberry farm, field of strawberries, they're ready to be harvested. The first workers are very productive. They just go right across the field just picking the most easily accessible strawberries and they fill their buckets very quickly. The second workers you hire have a little more trouble finding strawberries, but there's still a lot of them. The output continues to rise, but at a diminishing rate. Third worker has to start turning over the leaves to find ripe strawberries to pick, has to go looking harder, maybe going to some of the less accessible places. Fourth worker starts really going over where other people already picked. Fifth worker, sixth worker. Each worker picks fewer additional strawberries. We call this diminishing marginal productivity of labor. Because each additional worker has less and less with which to work, additional workers add less to your total output. Output rises, but at a diminishing rate. From this, we can graph a marginal product of labor and it will be downward sloping. Additional workers are less and less productive. If the additional workers are less and less productive, it means you need to add more and more workers to get the same increase in output. If you want to get another ounce of pot, you need to add maybe half a worker when you're starting, but by the time you have 10 workers there, you may need to add another 10 workers to get an additional ounce of pot. You want to pick another bucket of strawberries? First worker might do it in half an hour. After you have 10 workers there, you may need five workers to get that one extra bucket of strawberries. That is why your costs per marginal output rise, or what we call marginal cost increase because your marginal productivity is diminishing. To get the same additional output, you need more and more workers so you need to pay more and more. Marginal costs rise because the marginal productivity of labor falls. Thank you very much. Have a nice day.