Question

In: Economics

Let's assume that a business is operating in the short run. When it uses 1 building,...

Let's assume that a business is operating in the short run. When it uses 1 building, 5 machines, and 2 workers, it produces 25 products. When it uses 1 building, 5 machines, and 4 workers, it produces 50 products. When it uses 1 building, 5 machines, and 6 workers, it produces 100 products. When it uses 1 building, 5 machines, and 8 workers, it produces 165 products. When it uses 1 building, 5 machines, and 10 workers, it produces 240 products. When it uses 1 building, 5 machines, and 12 workers, it produces 275 products. When it uses 1 building, 5 machines, and 14 workers, it produces 292 products. With the hiring of which workers does the law of diminishing marginal returns begin?

4

6

8

10

12

14

Solutions

Expert Solution

Ans: 12

Explanation:

Marginal Product of Worker = Change in Total Product / Change in number of workers

Diminishing marginal returns states that the total product increases at a decreasing rate.

With the hiring 12 workers the law of diminishing marginal returns begins.

Number of
building
Number of
Machine
Number of
Workers
Total
Products
Marginal Product
of Worker
1 5 2 25 --
1 5 4 50 12.5
1 5 6 100 25
1 5 8 165 32.5
1 5 10 240 37.5
1 5 12 275 17.5
1 5 14 292 8.5

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