Question

The number of repairs produced by a computer repair shop depends on the number of workers as per the table below:

No. of workers per week	No. of Repairs
0	0
1	8
2	20
3	35
4	45
5	52
6	57
7	60

Assume that all inputs of production other than labour are fixed in the short run. Add two additional columns to the table and compute MP and AP for each no. of workers.

a. What are the stages of the production function you can identify. Please draw graphs to illustrate the relationship amongst total product, average product and marginal product.

b. Why is MP is rising initially? What happens to TP, MP and AP in the II nd Stage and why.

c. Will MP eventually become negative? Give your reasons.

Answer 1

Answer a) we can identify increasing returns stage from 1to 6 no. of workers/week and diminishing returns stage from 6 to 7 workers/week. Refer to the attached image for graphs

Answer b) MP is rising initially because the addition of more workers keeping other inputs constant increases TP at an increasing rate and MP rises

In second stage here TP is increasing but at a diminishing rate while MP starts falling and AP is increasing till MP>AP . Here AP is increasing throughout. All this happens because due to fall in Marginal product.

answer c) if we keep on increasing the no. of workers then MP eventually becomes negative . this happens because increasing the additional unit of workers beyond a certain point (keeping other inputs constant) gives less and less of total output and MP becomes negative