PROBLEM SET 5

PROBLEM SET 5 - PROBLEM SET 5 Production Department of...

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Unformatted text preview: PROBLEM SET 5 Production Department of Economics Professor William J. Stull Temple University Economics 1902 A. Cookies SmartTough.com is a commercial bakery selling cookies over the internet. A schedule showing how daily production of cookies varies in the short run with the number of bakers hired is shown in the first two columns Figure A. The marginal and average product schedules for labor are also shown. 1. Fill in the missing values in the table (labeled > ) using the definitions of average and marginal product. Note that the marginal product values are entered between the labor quantities. 2. Give a one sentence interpretation of the fourth number in column 2. _____________ ____________________________________________________________________ _ ____________________________________________________________________ _ 3. Give a one sentence interpretation of the sixth number in column 3. ______________ ____________________________________________________________________ _ ____________________________________________________________________ _ 4. Give a one sentence interpretation of the fifth number in column 4. ______________ ____________________________________________________________________ _ ____________________________________________________________________ _ 5. Plot the average product of labor against the number of bakers in Figure B. Put bakers on the horizontal axis. 6. Plot the marginal product of labor against the number of bakers. Locate each marginal product value at the midpoint between the two relevant labor quantities. 7. Beyond what labor quantity on the graph (not the table) do diminishing marginal returns set in? __________ Figure A Bakers [L] Tons of Cookies [Q] Average Product [AP(L)] Marginal Product [MP(L)]----------------------------------------------------------------------------------------------- ******** > 1 15.00 > 21.00 2 > > > 3 > 18.67 16.00 4 >> > > 5 82.00 > > 6 > 14.00 ******** = undefined. 8. Restate the law of (eventually) diminishing marginal returns in your own words. Do not use the term "marginal product" in your restatement. _______________________ ____________________________________________________________________ _ ____________________________________________________________________ _ ____________________________________________________________________ _ ____________________________________________________________________ _ ____________________________________________________________________ _ ____________________________________________________________________ _ 9. True or False: When a firm is experiencing diminishing marginal returns, average product must be declining....
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This note was uploaded on 04/28/2011 for the course ECON 1102 taught by Professor Tomczyk during the Spring '09 term at Temple.

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PROBLEM SET 5 - PROBLEM SET 5 Production Department of...

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