Question

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)


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

Answer 1

 The efficient level must produce at is 3 tons of fertilizer per month since it has the greatest average and marginal product.