Answer to Question #301280 in Microeconomics for Axis

Question

For an enterprise is given the following table, each worker earns a daily

compensation of $80.

Number of Labour         	            TP				     AP					MP
0 										0
1										8
2										14
3										18
4										25
5										30
6										32

(I) Calculate AP, MP, AVC, MC, and show your calculations.

(II) Represent in two different graphs the AP and MP(first graph) and AVC and MC (second graph)

(III) Compare MP and MC curves. Indicate similarities and differences.

(IV) Find at which point labor productivity starts to decline and explain why this happens?

Explain each answer, please

Answer 1

Average Product=$\frac{Total Product}{Variable Input}$

Marginal Product=$\frac{Change in Product}{Change in Input}$

Average Variable Cost = $\frac{Total Variable Cost}{Labor Input Quantity}$

Marginal Cost = $\frac{Change in Cost}{Change in Quantity}$

The labor productivity falls beyond the fourth laborer. This is due to increased laborers while capital remains the same leading to inefficiency.