Ch06 Textbook Answers

Ch06 Textbook Answers - Chapter6 Exercises2,3,6,7,8and10 2.

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Chapter 6 Exercises 2, 3, 6, 7, 8 and 10 2.  Suppose a chair manufacturer is producing in the short run (with its existing plant  and equipment).   The manufacturer has observed the following levels  of production  corresponding to different numbers of workers: Number of chairs                Number of workers     1 10 2 18 3 24 4 28 5 30 6 28 7 25 a. Calculate the marginal and average product of labor for this production function. The average product of labor,  AP L , is equal to  L q .  The marginal product of labor,  MP L is equal to  L q , the change in output divided by the change in labor input.  For this  production process we have: L q AP L MP L 0 0 __ __ 1 10 10 10 2 18 9 8 3 24 8 6 4 28 7 4 5 30 6 2 6 28 4.7 –2 7 25 3.6 –3 b. Does this production function exhibit diminishing returns to labor?  Explain. Yes, this production process exhibits diminishing returns to labor.   The marginal  product of labor, the extra output produced by each additional worker, diminishes as  workers are added, and this starts to occur with the second unit of labor. c. Explain intuitively what might cause the marginal product of labor to become  negative. Labor’s negative marginal product for  L  > 5 may arise from congestion in the chair  manufacturer’s factory.   Since more laborers are using the same fixed amount of 
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capital, it is possible that they could get in each other’s way, decreasing efficiency and  the amount of output.  Firms also have to control the quality of their output, and the  high congestion of labor may produce products that are not of a high enough quality to  be offered for sale, which can contribute to a negative marginal product.
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3.  Fill in the gaps in the table below. Quantity of  Variable Input Total Output Marginal Product of Variable Input Average Product of Variable Input 0    0 1 225 2 300 3 300 4 1140 5 225 6 225 Quantity of  Variable Input Total Output Marginal Product of Variable Input Average Product of Variable Input 0    0 ___ ___ 1 225 225 225 2 600 375 300 3 900 300 300 4 1140 240 285 5 1365 225 273 6 1350 –15 225 6.   A firm has a production process in which the inputs to production are perfectly  substitutable in the long run.   Can you tell whether the marginal rate of technical  substitution is high or low, or is further information necessary?  Discuss. Further information is necessary.  The marginal rate of technical substitution, 
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This note was uploaded on 09/24/2009 for the course ECON 2296 taught by Professor Gray during the Spring '09 term at Langara.

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Ch06 Textbook Answers - Chapter6 Exercises2,3,6,7,8and10 2.

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