Waec Model Questions Vol1 2017 Economics Question 4

Practice essay / theory question 4 from the 2017 Waec Model Questions Vol1 Economics examination. This question covers Production .

Waec Model Questions Vol1 2017 Economics Essay / Theory
Topic: Production
Question 4 WAEC_MODEL_QUESTIONS_VOL1 • 2017 • ECONOMICS • essay

A firm produces output using labour (L) and capital (K). The table below shows the marginal product of labour (MPL) and marginal product of capital (MPK) for different input combinations. | L (units) | K (units) | MPL (output per additional labour) | MPK (output per additional capital) | |-----------|-----------|-------------------------------------|--------------------------------------| | 1 | 2 | 120 | 80 | | 2 | 2 | 100 | 80 | | 3 | 2 | 80 | 80 | | 4 | 2 | 60 | 80 | The wage rate (cost of one unit of labour) is ₦50 and the rental rate of capital is ₦40 per unit. Answer the following questions.

Question Parts

( a )
Calculate the marginal rate of technical substitution (MRTS) of labour for capital at the input combination (L = 2, K = 2).
( b )
Explain the concept of diminishing marginal returns and illustrate it with reference to the MPL values in the table.
( c )
Given the input prices, determine which input (labour or capital) is relatively cheaper per unit of marginal product at (L = 2, K = 2) and recommend how the firm should adjust its input mix to minimise cost while maintaining the same level of output.

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About This Question

This is Waec Model Questions Vol1 2017 Economics Question 4. It is one of the essay questions from the 2017 Waec Model Questions Vol1 Economics examination.

The question covers Production .

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