Question

In: Economics

Estella decides to set up a lemonade stand on a hot summer day. Before long, Estella’s...

Estella decides to set up a lemonade stand on a hot summer day. Before long, Estella’s friends all decide they would like to help. The table below shows what happens to the number of glasses of lemonade Estella and her friends can make in an hour.

Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign.

Lemonade Stand's Labor and Production Levels

Labor (workers)	Total Product	Average Product	Marginal Product
0	0	-	-
1 (Estella)	7
2	16
3	21
4	22
5	18

a. Complete the average product and marginal product columns in the table above.

b. How many additional glasses of lemonade can Estella produce if she has one friend help her make lemonade instead of making lemonade by herself?

glasses

c. How many additional glasses of lemonade can Estella produce if she has four friends help her rather than having three friends help her?

glasses

d. If Estella has four friends help her, on average how many glasses of lemonade can her and her friends make per hour?

glasses

rev: 06_28_2018

Solutions

Expert Solution

Labor	Total product	Average product	Marginal product
0	0	---	----
1	7	7	7
2	16	8	9
3	21	7	5
4	22	5.5	1
5	18	3.6	-4

Average product = (Total product / Labor)

Marginal product = (Change in total product / Change in labor)

(b) When there is one labor, then Estella only works and no friend is helping her.

If there is two labor, then Estella and one friend of her works.

If there is three labor, then Estella and two friends of her works.

If there is four labor, then Estella and three friends of her works.

If there is five labor, then Estella and four friends of her works.

Marginal product at 2 units of labor shows the additional glasses of lemonade can Estella produce if she has one friend help her make lemonade instead of making lemonade by herself.

Answer: 9 glasses.

--------------

(c)

Marginal product at 5 units of labor shows additional glasses of lemonade can Estella produce if she has four friends help her rather than having three friends help her.

Marginal product of labor at 5 units of labor is -4.

Hence, taking help of 4th friend will decrease the production by 4 glasses.

Answer: -4 glasses

-----------------------------

(d) Average product at 5 units of labor shows the average number of glasses of lemonade made by the Estella and her four friends.

Answer: 3.6 glasses

Rahul Sunny answered 1 month ago

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