Question

3.  The table below shows the weekly relationship between output and number of workers for a factory with a fixed size of plant. P= 10$: w=100$

Number of Workers

Output

0

  0

1

 50

2

110

3

300

4

450

5

590

6

665

7

700

8

725

9

710

10 

705

 

a.   Calculate the marginal product of labor.

b.   At what point does diminishing returns set in?

c.   Calculate the average product of labor.

d.  Find out optimum level of variable input usage 

Answer 1

Let's solve it in excel:

Diminishing returns come at 4 workers and a volume of 450.

P>MC

Profit maximization comes at 9 workers and a volume of 710.