A firm's total product (TP) schedule for labour input is given below:

L (workers) : 0 1 2 3 4 5
TP (units) : 0 20 45 66 80 88

(a) Compute the marginal product (MP) and average product (AP) of labour for each additional worker from L=1 to L=5.
(b) Using linear interpolation between the relevant points, estimate the number of workers at which MP equals AP.
(c) State whether the firm is experiencing diminishing marginal returns beyond that point.

Question

A firm's total product (TP) schedule for labour input is given below:

L (workers) : 0 1 2 3 4 5
TP (units)   : 0 20 45 66 80 88

(a) Compute the marginal product (MP) and average product (AP) of labour for each additional worker from L=1 to L=5.
(b) Using linear interpolation between the relevant points, estimate the number of workers at which MP equals AP.
(c) State whether the firm is experiencing diminishing marginal returns beyond that point.

Accepted Answer

MP: 20, 25, 21, 14, 8; AP: 20, 22.5, 22, 20, 17.6. MP = AP at approximately 2.71 workers; beyond this point marginal product falls, so the firm experiences diminishing marginal returns.

Neco Model Questions Vol1 2024 Economics Question 3

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