Courses : Intermediate Microeconomics Lecturer : Frischa Adellia Semester : 4th Semester, 2022/2023 Sesion Production Margin Marginal production is the additional output or product produced when one additional unit of input is applied to the production process. In economics, marginal production is an important concept in analyzing the productivity and efficiency of a company. The marginal production is calculated by calculating the change in production output when one additional unit of input is applied to the production process, assuming all other factors of production are held constant. Thus, if the firm employs one additional work in the production process and output increases by 10 units, then the marginal production is 10 units. The concept of marginal production is very useful in determining the optimal level of use of factors of production to achieve maximum output at minimum cost. In production, this can help companies choose how much input should be used to maximize production output. In addition, the marginal production is also used in the analysis of production costs. Marginal cost of production (MCP) is the additional cost that must be incurred to produce one additional unit of output. If the MCP is less than the selling price of the product, then the company will benefit by producing more. However, if the MCP is greater than the selling price of the product, then the company will make a loss and should reduce production. In the short term, the marginal production can provide a clear view of the efficiency of using inputs in production. However, in the long term, some factors of production may become less flexible, such as limited land and labor. Therefore, in the long run, companies need to consider more flexible factors of production, such as new machines or technologies, to increase output and overall production efficiency. In the context of perfect competition, the use of marginal production and MCP can help firms determine the optimal level of production and price to maximize profits. The company will achieve maximum profit at the point where the marginal cost of production equals the selling price of the product. If the selling price of the product is greater than the MCP, then the company can increase production and get additional profits from selling additional products. However, if the selling price of the product is less than the MCP, the company must reduce production to avoid losses. In the long term, if the selling price of the product continues to be below the MCP, then the company will not be able to survive in the long term and may exit the market. However, if the selling price of the product exceeds the MCP, then the company will generate economic profits and can survive in the long run. In a perfectly competitive market, where there is no dominant market force, the company cannot control the selling price of the product. Therefore, they must adjust their production to market prices and produce at a production level where the MCP equals the selling price of the product. In the long run, if the company cannot break even or even make an economic profit, then the company will exit the market and cause a decrease in the number of sellers in the market. This will ultimately affect market prices and the level of profit that can be generated by companies that remain in the market. In this case, MCP becomes very important in determining the optimal production level and product selling price. If the MCP is low, the firm will have more incentive to increase production and enter the market. However, if the MCP is high, the firm will have less incentive to enter the market and increase production. In the long run, MCP can be affected by factors such as technology, input costs, government regulations, and competition between producers. Over time, technological developments can reduce production costs and increase efficiency, thereby reducing MCP. However, if input costs such as labor and raw materials increase, MCP will also increase. Government regulations, such as taxes and environmental regulations, can also affect the MCP. If regulation increases production costs, MCP will rise. Meanwhile, competition between producers can affect MCP by encouraging producers to pursue efficiency and reduce production costs to maintain product selling prices. In a perfectly competitive market, MCP is important to determine the optimal level of production and the selling price of the product. Producers must ensure that their MCP is equal to the selling price of the product in order to make normal profits in the long term and survive in the market. Factors such as technology, input costs, government regulations, and competition between producers can affect MCP, and producers must be able to adapt their production according to these changes to stay competitive in the market.