Answer to Question #210939 in Microeconomics for Mehak

Question

Suppose that you are running a fast food chain business on a small stand near the Lake view park Islamabad. It’s a rainy day, and customers are lined up for burgers at your small stand. The following table shows your firm’s short-run production function for burgers. (10)

Number of workers Total Output

0 0

1 20

2 50

3 75

4 90

5 100

6 105

7 100

8 90

When does diminishing marginal product begin? How many workers are too many? Use marginal product to decide.

Answer 1

The diminishing marginal product begins from the addition of 3rd labor onwards. As shown in the above graph, the MP started to decline.

From the use of 7th labor, we have negative returns. MP becomes negative, meaning too much labor is being used