Question

QUESTION 3 (9 Marks) Baiyun Airport MacDonald Outlet owns three ice cream machines for its ice cream unit. It also has other inputs such as refrigerators, ice cream mixer, cups, sprinkle toppings, and, employees. It estimates daily production function by varying the number of workers employed (and at the same time, other inputs) as shown in the table below: Quantity of labor (employees) 0 Quantity of ice cream (cups) 0 110 2 200 زرا 270 4 300 5 320 6 330 i. What are the fixed inputs and variable inputs in the production of cups of ice cream? 11. Represent the information on a graph. 111. What is the marginal product of the first, second and third workers? Why does it show a decline as the number increases?

Answer 1

1) Inputs are classified into fixed inputs and variable inputs based on whether they would vary with the production of output or not.

Fixes inputs are inputs don't change as output changes. Variable inputs on the other hand, vary with output.

> Fixed inputs used in the production of output are refrigerator and ice cream mixer.

> Variable inputs used in the production of ice cream are cups, sprinkle toppings and employees.

2) ln order to plot the given data on a diagram, we measure the quantity of labour along the X axis and quantity of ice cream along the Y axis .

340 This cuone Represents the total product 320 of labour 300 280 260 240 220 ab ice cream 200 180 1160 Quantity 140 120 100 80 60 1407 20 2 0 3 4 5 6 8 9 10 Quanlity of labour

3) Marginal product can be found using the following formula

MPL=∆ TP/∆ L

MPL = marginal product of labor

∆TP= change in total product

∆ L = change in labour input

Marginal product of the first worker = 110

Marginal product of the second worker = 90

Marginal product of the third worker. = 70

*Marginal product is showing a decline. It represents the operation of diminishing returns or increasing costs in production process.

As more labour or workers are employed in the production, addition to the total product is decreasing .Further increase in labour eventually lead to a situation lead to a situation of marginal product being negative.

MPA Quantity of quantity of labour Output 1P a - 2 200 270 کیا (110-0)/1-110 600-110)/1-go (270-200)/1 = 70 (300-240/1-30 (320 - 300).do (3 30-320)41 = 10 H 300 5 320 330 6