managerial econ assignment - Name: Subject: ECON 3017...

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Name: Subject: ECON 3017 Managerial Economics ASSIGNMENT 2 1. This occurs as a result of the law of diminishing marginal returns to labour also called the law of variable proportion. The law of diminishing marginal returns states that if increasing quantities of a variable factor are applied to a given quantity of fixed factor, then the marginal product (of labour in this case) and the average product of the variable factor will eventually decrease. The law of diminishing marginal returns to labour also called the law of variable proportion because it predicts the consequences of the varying proportions in which factors of production are used. For this theory the fixed factor limits the amount of additional output that can be obtained by adding more of the variable factor. As it means then diminishing marginal returns simply means an inexorable decline in the marginal productivity of each additional worker. The graph show that the MP is the slope of TP. Thus when TP increases at an increasing rate then the MP increases as well. When TP starts to decrease MP does the same. The maximum point on the MP L is or represents diminishing marginal product which is the inflection point on the TP L and MP L is at its maximum. At the inflection point the Law of diminishing marginal starts to work. 2. (a) K (capital) L (labour) TP (total product) MP L (marginal product) AP L (marginal product) 5 0 0 - - 5 1 20 20 20 5 2 45 25 22.5 5 3 75 30 25 5 4 110 35 27.5 5 5 130 20 26 5 6 140 10 23.3 5 7 140 0 20 5 8 135 -5 16.875
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(b) A fishing company conducted a series of experiment to determine the amount of fish that could be caught. The results are: L (labour) Fisherman TP (total product) Fish (lbs) MP L (marginal product) AP L (marginal product) 1 1 - - 2 4 3 2 3 24 20 8 4 48 24 12 5 70 22 14 6 90 20 15 7 98 8 14 8 104 6 13 9 104 0 11.55 10 102 -2 10.2 11 99 -3 9 (c) Firm will hire when MC=MR the wage rate is sixty dollars ($60) and a pound of fish is $10 then the firm must hire when the MP L × $10 = $60 wage rate. In this case when there is 8 fishermen MP
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This note was uploaded on 11/12/2011 for the course MGMT 3032 taught by Professor Estephanej during the Spring '11 term at University of the West Indies at Cave Hill.

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managerial econ assignment - Name: Subject: ECON 3017...

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