Neco 2020 Economics Question 4

Practice essay / theory question 4 from the 2020 Neco Economics examination. This question covers Production .

Neco 2020 Economics Essay / Theory

Topic: Production

Question 4 NECO • 2020 • ECONOMICS • essay

A manufacturing firm produces widgets using labour (L) and a fixed amount of capital (K = 10 units). The total product (TP) obtained from different numbers of workers is shown in the table below. | Workers (L) | Total Product (TP) | |-------------|--------------------| | 1 | 20 | | 2 | 45 | | 3 | 66 | | 4 | 80 | | 5 | 88 | | 6 | 92 | Answer the following questions:

Question Parts

( a )

Calculate the marginal product of labour (MPL) for each additional worker from the second to the sixth worker.

( b )

Identify the point (i.e., the number of workers) at which the law of diminishing marginal returns sets in and explain why this occurs in the short run.

( c )

If the market price of a widget is ₦30 per unit, the wage rate for a worker is ₦200 per period, and capital cost is sunk, determine the optimal number of workers the firm should employ in the short run. Use the concept of marginal revenue product (MRP = Price × MPL). Show your calculations and justify the choice.

( d )

Briefly discuss how the decision on the number of workers might differ in the long run when capital is no longer fixed.

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About This Question

This is Neco 2020 Economics Question 4. It is one of the essay questions from the 2020 Neco Economics examination.

The question covers Production .

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