In the context of production efficiency, how would an increase in marginal product of labor affect fixed costs?

The marginal product of labor refers to the additional output that is produced when one more worker is added. When the marginal product of labor increases, it means that each worker is contributing more to the overall production. This can lead to higher efficiency, allowing a company to produce more without necessarily increasing its fixed costs, which are expenses that do not change with the level of output, like rent or salaries of permanent staff. For example, if a factory hires an extra worker who significantly boosts production, the factory can sell more goods without needing to pay more for its building or equipment. Therefore, while the variable costs may rise due to hiring more workers, fixed costs remain the same, improving overall profitability.