If workers become more productive as more are hired, explain what happens to the value of labor to a producer?
Answer: If the additional output an employer gets as a result of hiring another worker goes up, the marginal cost of those additional units of output goes down. Consider an increase in marginal productivity from 10 units to 12 units per hour while the wage is $5 per hour. If an employer hires the new worker, the total cost goes up by $5 (the wage). Marginal cost would have been $0.50 under the original marginal product. Now it is $0.42. The labor becomes more valuable to the employer.