Question

Answer the following questions. Assume other inputs other than labor are fixed in the short run.

1. Compute the average and marginal product and put the values in the table below.

   # workers	Repairs	AP	MP
   0	0
   1	10
   2	21
   3	33
   4	43
   5	52
   6	60
   7	67
   8	73
   9	78

2. Over what range of labor output are there increasing returns to labor? Diminishing returns to labor? Negative returns?
3. Over what range of product is marginal product greater than average product? What is happening to average product as employment increases over this range?
4. Over what range of labor input is marginal product smaller than the average product? What is happening to the average product as employment increases over this range?

Answer 1

Marginal product of labor is defined as the additional product produced by an additional unit of labor.

MPL=dTPL/dL

Average product of labor=TP/number of labor

Both AP and MP initially increases and reaches maximum then start falling. Hence it is inverse U shape.

As it can be seen in the table that MP of labor is increasing from 0 to 3 units of labor, so there is increasing return over this range and MP of labor is decreasing from 4 to 9 units of labor, so there is decreasing return over this range. Since MP of labor is not negative, so there is no negative return.

2.

As it can be seen in the table that over 0 to 3 units of labor, marginal product greater than average product. Average product of labor is increasing as employment increases over this range.

3.

Over the range (4 to 9) units of labor input is marginal product smaller than the average product. The average product decreases as employment increases over this range.