Question

Question Four [10 marks]

A firm uses the inputs of fertilizer, labor, and hothouses to produce roses. Suppose that

when the quantity of labor and hothouses is fixed, the relationship between the quantity of

fertilizer and the number of roses produced is given by the following table:

Tons of fertilizer /

month

No of roses/ month Tons of fertilizer /

month

No of roses/ month

0 0 5 2500

1 500 6 2600

2 100 7 2500

3 1700 8 2000

4 2200

(Hint, write out the average and marginal product for each ton of fertilizer)

a) What is the average product of fertilizer when 4 tons are used? (2m)


e) What is the efficient level of output it must produce at?

Answer 1

a) The average product of fertilizer when 4 tons are used is $AP = TP/Q = 2200/4 = 550.$

e) The efficient level of output it must produce at is 2600 with 5 tons used, because if 6 tons are used, the total product will decrease.