ECON200 QUIZ5 - Quiz 5-Econ 200A 30 points- Maximum of 24...

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Q u i z 5 - E c o n 2 0 0 A Fall 2009 30 points- Maximum of 24 minutes allowed Answer Key 1. (18 points) A wheat farm has the following quantity of output (in tons per week) with the amount of labor working on the farm: L Q MPL APL 1 2 2 2 2 8 6 4 3 13 5 4.33 4 17 4 4.25 5 20 3 4 6 22 2 3.66 7 23 1 3.28 8 23 0 2.87 a. Fill in the blanks for the marginal productivity of labor (MPL) and the average productivity of labor (APL). b. In general, why does the MPL fall as output increases? The MPL falls as more labor is added to a fixed number of other inputs (capital or land) to produce more output. c. Does a falling MPL imply falling marginal cost (MC), constant MC or rising MC of production? Explain. A diminishing MPL implies increasing costs at the margin. Given a level of wage paid to workers, as increasing number of workers add less to output (i.e., MPL falls), it implies that the cost of producing increasing units of the product goes up. As an example, suppose the 5 th worker in a factory –working for one hour--can produce the 5
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ECON200 QUIZ5 - Quiz 5-Econ 200A 30 points- Maximum of 24...

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