For the last couple semesters, I've dropped the discussion of production costs from my principles class - I've felt like I didn't have time and most students who aren't going to take additional economics classes really don't need to sit through the derivation of all the cost curves. So I just go through an intuitive explanation of why the supply curve is upward-sloping and leave it at that. But this semester, I decided to at least go through the derivation of the supply curve as the marginal cost curve because I think it will help students to make a stronger connection between supply and the firm's costs. Plus, decreasing marginal product/increasing marginal cost is one of the few concepts that I can teach with an in-class demonstration and I've missed doing that.
In my smaller classes, and in the old days of chalkboards, I would have students 'grow rice' on the board. I don't remember where I first saw that activity but students write the word 'RICE' on the board as many times as they can in, say, ten seconds. They have fixed capital (one piece of chalk and a set amount of space on the board) and then you start adding labor. Since they only have one piece of chalk, they have to break up the chalk to share and it gets pretty funny as they try to break it into smaller and smaller pieces. They also start getting in each other's way at the board. Students can get pretty creative about trying to maximize output (e.g., recruiting short and tall people who can reach different areas of the board without bumping each other) but diminishing marginal product always sets in at some point.
With the big classroom, there isn't a chalkboard so I had to figure out something else and I found a game using tennis balls where students 'produce' tennis balls by moving the balls from one bucket to another. It works pretty well and like with the rice activity, it can be quite amusing to see the students try not to run into each other*. There are different variations of how you set up the production process - I tell the students that each student can only carry one ball at a time and they must individually place the ball in the other bucket but an alternative is to let them form a line and pass the balls down (diminishing marginal product sets in partly because they invariably start dropping them). The important thing (which I learned the first time I ran it) is that you have to be very clear with them that they cannot change the technology as they add more workers; as long as that's clear, you should start getting diminishing MP pretty quickly.
One of the cool things about this activity is that is can be done with a class of any size. I've always found that it's just as memorable for students who simply observe as for those who personally participate.
* For anyone who might be wondering, I know that another common activity to show the same concept is to have students fold and/or staple paper in a production line to create widgets or paper airplanes or something like that, but I've always thought that the rice and tennis ball games are more appealing because the students are a lot more physically active and that seems to get the other students more involved (e.g., cheering them on as they run around). Or maybe I'm just slightly sadistic and like to see them running into each other...
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