Question

Table 1 represents input and output data for Onion production in Michigan. Complete
the table given price of tomato is at $5.00.
Input level Total Physical Product (TPP) Marginal Physical Product (MPP) Total Value Product(TVP)
0 24
1 35
2 40
3 60
4 55
5 45
6 30
7 15

a. Complete Table 1 by calculating MPP and TVP of Onion enterprise.
b. Plot a graph using TPP and MPP given figures you have calculated in 3(a).
c. Using the graph in 3(b), Explain the three stages of production function.
d. List three types of input substitutions.

Answer 1

a.Formula used to calculate MPP and TVP are

MPP = (change in TPP / change in input)

TVP = TPP * P , where P is price of tomato ; P= $5

input	TPP	MPP	TVP
0	24	-	120
1	35	11	175
2	40	5	200
3	60	20	300
4	55	-5	275
5	45	-10	225
6	30	-15	150
7	15	-15	75

b) The plotted graph is presented below using above table:

c) Three stages of production have been illustrated in the graph

In stage I, both TPP and MPP are increasing and MPP touches its highest point. In stage II, both TPP and MPP are falling and MPP reaches at zero incating beyond which production is no more feasible. In stage III, MPP is negative. It indicates, increasing in input has no contribution in production at all and moreover they are increasing costs only for the firm.

d) Three types of input substitutions are

at constant rate means perfect substitution

Decreasing rate (means the isoquant is negatively sloped convex)

no substitution ( isoquant is L-shaped)