Question

1.   Suppose the following production function refers to a bicycle shop:

        Quantity of Labor           Bicycles Assembled (per day)

        ----------------------          ---------------------------------

                0                                      0

                1                                      5

                2                                      12

                3                                      20

                4                                      27

                5                                      32

                6                                      34

a) What is the marginal product of the first worker? The second worker? The fifth worker?

b) At what point does the law of diminishing returns become apparent?

Answer 1

Ques: Marginal Product of labor is the change is the total output due to the employment of an additional unit of labor(variable factor) along with some fixed factor.

MP = TPn - TPn-1

Quantity of Labor	Bicycles assembled per day	Marginal Product of labor
0	0	-
1	5	5
2	12	7
3	20	8
4	27	7
5	32	5
6	34	2

a. from the above table Marginal product for first labor is 5 units of bicycles.

The marginal product of the second labor is 7 units of bicycles.

The marginal product of the fifth unit of labor is 5 bicycles.

b. Since Marginal Product starts falling after the fifth unit of labor. It means after the fifth unit of labor the total product is rising at the diminishing rate. Hence, the law of diminishing marginal return applied from the fifth worker.