Neco Model Questions Vol1 2021 Economics Question 30

Practice objective / multiple choice question 30 from the 2021 Neco Model Questions Vol1 Economics examination.

Neco Model Questions Vol1 2021 Economics Objective / Multiple Choice Medium Difficulty
Question 30 NECO_MODEL_QUESTIONS_VOL1 • 2021 • ECONOMICS • objective

A firm's total product (TP) from labor \(L\) (with capital fixed) is given by \( TP = -0.1L^{3} + 6L^{2} \) for \(0 \le L \le 40\). (i) Determine the level of labor at which average product (AP) is maximized and compute that maximum AP. (ii) Find the labor level where marginal product (MP) equals AP. (iii) At \(L = 30\), state whether the firm is experiencing increasing, diminishing, or negative returns to labor.

Answer Options

A. AP is maximized at L = 25 with maximum AP = 85; MP = AP also at L = 25; at L = 25 the firm is at the point where returns begin to increase (increasing returns).
Correct Answer B. AP is maximized at L = 30 with maximum AP = 90; MP = AP also at L = 30; at L = 30 the firm is at the point where returns begin to diminish (diminishing returns).
C. AP is maximized at L = 35 with maximum AP = 95; MP = AP also at L = 35; at L = 35 the firm is experiencing negative returns to labor.
D. AP is maximized at L = 20 with maximum AP = 80; MP = AP also at L = 20; at L = 20 the firm is experiencing increasing returns to labor.
Correct Answer
B
Correct Option:
AP is maximized at L = 30 with maximum AP = 90; MP = AP also at L = 30; at L = 30 the firm is at the point where returns begin to diminish (diminishing returns).

About This Question

This is Neco Model Questions Vol1 2021 Economics Question 30. It is one of the objective questions from the 2021 Neco Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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