Neco Model Questions Vol1 2020 Economics Question 4

Practice essay / theory question 4 from the 2020 Neco Model Questions Vol1 Economics examination. This question covers Production .

Neco Model Questions Vol1 2020 Economics Essay / Theory

Topic: Production

Question 4 NECO_MODEL_QUESTIONS_VOL1 • 2020 • ECONOMICS • essay

A small manufacturing firm employs labour as its only variable input. The table below shows the total product (TP) obtained from different numbers of workers (L) in the short run. | L (workers) | TP (units) | |-------------|------------| | 0 | 0 | | 1 | 20 | | 2 | 45 | | 3 | 75 | | 4 | 100 | | 5 | 120 | | 6 | 135 | | 7 | 145 | The wage rate per worker is ₦200 per period. Fixed cost is ₦500 per period. The product sells at a constant price of ₦50 per unit.

Question Parts

( a )

Calculate the marginal product (MP) and average product (AP) of labour for each additional worker from L = 1 to L = 7.

( b )

Identify the point at which diminishing marginal returns set in and explain, using the computed MP, why this occurs.

( c )

Using the wage rate, compute the marginal cost (MC) of output for each additional worker (MC = wage/MP). Then, based on the constant price of ₦50, determine the profit‑maximising level of output for the firm in the short run and justify your answer.

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About This Question

This is Neco Model Questions Vol1 2020 Economics Question 4. It is one of the essay questions from the 2020 Neco Model Questions Vol1 Economics examination.

The question covers Production .

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