 The marginal product curve shows the contribution that each additional unit of the variable factor makes to total production. In our case, it shows what each additional worker adds to our output. From the marginal product curve, we can see that the marginal product of labour first increases, reaches a maximum and then decreases. Let's see how this marginal product curve relates to the marginal cost curve. The marginal cost curve shows us the other side of the same coin. It tells us what happens to the cost of producing each additional unit. It first decreases, reaches a minimum and then costs start to increase. Assuming a given price for the product and a given wage for labour, we can now establish the relationship between the two curves and so explain the shape of the marginal cost curve. Assuming we pay all the workers the same wage, an increase in the marginal product of labour implies that for the additional money we spend to employ this additional worker, it in fact means that we get a greater output for the money spent. And this then means that the cost of producing the additional unit in fact decreases. As the marginal product of labour goes up, the marginal cost decreases. Now what happens to marginal cost if the marginal product of labour decreases? Now since we pay each worker the same wage, if the marginal product of each new worker falls, it suggests that the additional wages we're paying are producing less and less, so our marginal cost is actually increasing. As marginal product declines, marginal cost increases. It also follows then that when marginal product is at its maximum, marginal cost will be at its minimum. The same relationship can be seen between the average product and the average variable cost curves. We've now looked at different costs and the law of diminishing returns. Remember these because they're useful tools for the rest of your economic studies. And don't forget, you have a rewind button if anything's unclear.