i) Average product of labour= total output/ Labor
Marginal product of labor = ∆Q/∆L
L | K | Q | APL | MPL |
0 | 5 | 0 | 0 | 0 |
1 | 5 | 5 | 5 | 5 |
2 | 5 | 22 | 11 | 17 |
3 | 5 | 48 | 16 | 26 |
4 | 5 | 68 | 17 | 20 |
5 | 5 | 80 | 16 | 12 |
6 | 5 | 78 | 13 | -2 |
ii) When Total output= 68 The marginal returns starts to decreases from 26 to 20. 4th labor produce less output than the previous .
iii) At L= 6 we observe negative marginal product = -2. It means when one more labor is added it actually decreases the total output instead of increasing it. When L=6 Total output = 78, it has fallen from 80.
iv) At L=3, TP=Q= 48, MP= 26
At L=4,TP=Q=68, MP= 20
We can see that total output is more when L=4. It is more productive but at L=4 MP starts to decline.
In-class Activity #7 Below table illustrates the production of a furniture manufacturing company ...
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