Question

a. Complete the following table.

Number of Workers | Average product of labor Total product Marginal product of labor 20

b. Explain whether the production function satisfies the diminishing marginal returns property.

c. Draw the firm’s short-run production function and verify graphically that average product is falling when it is higher than the marginal product and that total product is falling when marginal product is negative.

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Answer #1

a.

Number of workers APL TP MPL O ... 1 20 uw N wa

b.

The diminishing marginal return sets in when MPL of starts decreasing.

Yes, this production function satisfies the law of diminishing return because MPL curve is downward sloping.

Chart Title output labor APL - TPO — MPL....

c.

As it can be seen in the table and graph that APL is greater than MPL, so it is falling.

When MPL becomes negative, the TP is falling.

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