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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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