Question

Question 6 [12] The following graph shows the tons of wheat produced by a farmer in North- West. Use the information on the graph to answer the questions that follow. 6.1 132 26 125 75 32 Labour units 6.1.1. The amount of land is fixed and an increasing number of labourers are employed. How many tons of wheat does the farmer produce with two, (1) four and seven labourers, respectively? 6.1.2. How many units of labour are required to produce the highest possible (1) total output? 6.1.3. How many additional tons of wheat are produced by adding a fourth (1) labourer to the production process? (1) 6.1.4. At how many units of labour does diminishing marginal return set in? 6.1.5. Calculate the slope of the total product (TP) curve between two and (1) three units of labour. (1) 6.1.6. How would you describe the shape of the total product (TP) curve? The following information is provided. 6.2. Total cost Total fixed Total Average Marginal Output variable cost variable cost (TC) cost cost (TFC) (TVC) (AVC) (мс) 30 0 10 40 10 1 48 30 2 21 7 4 56 Total product (1P)

Answer 1

1) For L = 2, total product is 40 tons. For L = 4, total product is 108 tons. For L = 7, total product is 126 tons.

2) 7 units of labor to produce maximum output which is 126 tons

3) When 4^th labor unit is hired, total product is increased from 75 tons to 108 tons so the additional output produced by 4^th unit of labor is 33 tons

4) At L = 4, because then marginal product starts decreasing

5) Slope is the MPL. Hence the slope between 2^nd and 3^rd unit of labor is 75 – 40 = -35

6) TP increases at increasing rate from L = 1 to L = 4. Then it increases at decreasing rate from L = 4 to L = 6 and finally it starts falling from L = 6 onwards. Hence it is inverse U-shaped

The table is given below

Quantity	Total cost	Fixed cost	Variable cost	Average variable cost	Marginal cost
0	30	30	0
					10
1	40	30	10	10
					8
2	48	30	18	9
					3
3	51	30	21	7
					5
4	56	30	26	6.5