Question

You may complete the following table. Units of labour Total production (units) Average production Marginal production 0 0 ---------------- --------------------- 1 2 2 5 3 9 4 12 5 14 6 15 7 15 8 14 Increasing returns to scale occur when the range of units of variable factor is from A. 1 to 3 B. 4 to 6 C. 6 to 8 D. 3 to 5

2. Microeconomics

Answer 1

Units of variable factor Labour ( input) L	Total Product TP( units)	Average Product (AP) units TP/L	Marginal Product (MP) units ∆TP/∆L
1	2	2	--
2	5	2•5	3
3	9	3	4
4	12	3	3
5	14	2•8	2
6	15	2•5	1
7	15	2•1	0
8	14	1•7	-1

In the above production function ,we find that ----

-Upto 3 units of labour ,TP increases at increasing rate and MP increases

-Upto 6 units of labour MP start diminishing and TP increases at diminishing rate

-At 7 th unit, Tp is maximum while MP is zero

-Afterthat, Tp decrease,and MP is negetive

#Increasing returns to scale

In the long run, Output can be increased by increasing all factors of production,that is fixed as well as variable.

When output increases by more than proportional increase in inputs ,it is called increasing returns to scale.

For example---

Input Increase by 10%

Output increase by 15%

It is called increasing returns to scale

See the graph------

As asked in question, i have marked points A,B,C,D to depict IRS( increasing returns to scale)

# Micro Economics------

It is the study of individuals, households and firms in decision making and allocation of resources.