Tutorial+6+Solutions

# Tutorial+6+Solutions - Eco1010f Tut assignment 6 th Due...

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Eco1010f Tut assignment 6 Due date: week beginning 29 th March 2010 If necessary please read ahead to complete this tut. 1) A firm uses only two inputs, capital and labour. The capital input is fixed at five units in the short run, but labour is variable. The hourly total production of the firm (TP L ) depends on the number of man-hours (Q L ) employed. The outcome is shown in the table below. Q L TP L AP L MP L 0 0 0 0 1 7 7 7 2 21 10.5 14 3 40 13.3 19 4 49 12.25 9 5 54 10.8 5 6 55 9.17 1 7 54 8 -1 8 49 6.1 -5 1. Calculate the values of AP L and MP L in the table. 2. Sketch the TP L , AP L and MP L curves graphically. Q /t x x 50 x x 40 x 30 20 x 10 x 0 1 2 3 4 5 6 7 8 Man hours of labour (N) 3. What is the law of diminishing returns? At what point on your graph does the law come into operation? Explain in terms of the TP, AP and MP curves.

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DIMINISHING RETURNS IS STRICTLY ‘DIMINISHING MARGINAL RETURNS’ IT KICKS IN WHEN MP STARTS FALLING (I.E. AT 3 MAN HOURS OF LABOUR) IN TERMS OF TP IT IS AT THE POINT OF INFLEXION
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Tutorial+6+Solutions - Eco1010f Tut assignment 6 th Due...

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