1. a) Suppose a firm has short-run productivity data as shown in the table below. This...
1. a) Suppose a firm has short-run productivity data as shown in the table below. This firm is experiencing diminishing marginal product over this range of labour input:
| Labour (Hours) | Total Product (Output) |
| 14 | 50 |
| 15 | 70 |
| 16 | 80 |
Is this true, false, or uncertain? If so, please explain why in detail.
b) If the firm from A3-3 pays its workers $20/hour, then the firm experiences increasing marginal cost between output levels 50 and 80. [Hint: An approximation of MC is the change in cost divided by the change in output.]
Is this question true, false, or uncertain? If so, please explain why in detail.
Homework Answers
A) True
This is because in output range of 14-15, MP is ,70-50 = 20 and in output range of 15-16 MP is 80-70 = 10
Thus, marginal product is diminishing.
B) False (as the marginal cost is fixed, there will be constant cost)
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