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Marginal Products and Average Products

The number of repairs produced by a computer repair shop depends on the number of workers as follows:
#of Workers #of Repairs
0 0
1 8
2 20
3 35
4 45
5 52
6 57
7 60

Assume that all inputs other than labor are fixed in the short run.

a)Add 2 additional columns to the table, and enter the marginal product and average product for each number of workers

b)Over what range of labor input are there increasing returns to labor? Diminishing returns to labor? Negative returns to labor?

c) Over what range of labor input is marginal product greater than average product? What is happening to average product as employment increases over this range?

d)Over what range of labor input is marginal product smaller than average product? What is happening to average product as employment increases over this range?

Solution Preview

a) Workers Repairs MP AP

0 0 - -
1 8 8 8
2 20 12 10
3 35 15 11.7
4 45 10 11.3
5 52 7 10.4
6 57 5 9.5
7 60 3 8.6

This table gives the way in which the average and marginal products vary with output and labor. Note that the average product (AP) is given by the ratio of total output to the number of workers ...

Solution Summary

The solution explains marginal and average products for each number of works. Diminishing returns of labor is determined.

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