Question

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Table 1. Technical Relationship between Labour Use and Amount of Chicken Wings roduced Labour Input ours Chicken Wins Marginal Physical Average Physical TPP) 423 1224 2241 3312 4275 4968 5229 4896 Product (MPP) Product (APP) 12 18 24 30 36 42 48 133.5 169.5 178.5 160.5 115.5 13.5 55.5 70.5 102 124.5 138 142.5 138 124.5 102

1. Plot the TPP on one graph and the MPP and APP on another graph. Divide the graphs into the three stages of production. Remember to label your graphs.
2. What quantities of labour (in hours) would be rational to employ? Explain why.
3. What is the quantity of labour at which diminishing marginal returns (or diminishing marginal product) begins to take effect. Explain why you know this is the point at which DMR begins.
4. Using an appropriate diagram, illustrate and briefly discuss what would happen to the TPP curve if a new technology was developed (and adopted) that decreases the time to cook chicken-wings.

Answer 1

a.

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b. 24 labor hours would be rational, as MPP reaches the maximum and starts to decrease later

c. At labor of 36 hours, the diminishing marginal return starts to begin which can be seen in the MPP and APP graph

d.

With the adoption of new technology, the total physical product produced increases for the same labor input hours which shifts the TPP curve upwards.