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Law of diminishing marginal product

You are the production manager at a steel plant, where all of the capital investment has been made for the next year. The only input you control is the amount of labor, which is priced at $15 per unit. Fill in the blanks in the following table and answer the question below.

Labor Total Marginal Average Average Short-Run
Usage Product Product Product Variable Cost Marginal Cost
1 _____ _____ 12 ______ ______
2 30 _____ ______ ______ ______
3 _____ 21 ______ ______ ______
4 _____ _____ ______ ______ $1.00
5 _____ _____ ______ $1.00 ______
6 _____ 6 ______ ______ ______
7 84 _____ ______ ______ ______

After how many units of labor is the law of diminishing marginal product exhibited?

Solution Preview

Please refer attached file for better clarity of tables.

Labor Total Product Marginal Product Average Product Average Variable Cost Short run Marginal Cost
Usage,L Q MP AP=Q/L AVC SMC
1 12 12 12 1.25 1.25
2 30 18 15 1.00 0.83
3 51 21 17 0.88 ...

Solution Summary

Solution explains formulas and methodology to get the missing numbers. It also determines after how many units of labor the law of diminishing marginal product is exhibited.

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