Diminishing Marginal Returns tells us that as a firm hires more units of a resource, the marginal product of those resources eventually diminishes.

Marginal Product per Dollar is a calculation of a marginal product to cost ratio for a firm’s hiring of an additional unit of a resource. The formula is marginal product divided by price of the resource (MP/P). So if the last worker hired has a marginal product of 15 and that worker costs $5, the marginal product per dollar is 3.

Marginal Revenue Product per Dollar is a calculation of the marginal revenue product to cost ratio for a firm’s hiring of an additional unit of a resource. The formula is marginal revenue product divided by price of the resource (MRP/P). Using the example above, if each unit sells for $10 then the last worker has a marginal revenue product of $150 (15x$10). That means the marginal revenue product per dollar of the last worker hired is $30 ($150/$5)

Least Cost Combination occurs when a firm adjusts their employment of resources to minimize costs. The least cost combination is found where the marginal product per dollar for all the resources a firm employs are equal (MPL/PL=MPN/PN=MPC/PC). If the ratios are not equal, a firm would reduce cost by employing more of the resource with a higher MP/P and less of the resource with a lower MP/P.