Number of workers (per week) Number of Repairs (per week) 0 0 1 8 2 20 3 35 4 45

Question

Number of workers (per week) Number of Repairs (per week) 0 0 1 8 2 20 3 35 4 45 5 52 6 57 7 60 The number of repairs produced by a computer repair shop depends on the number of workers as follows: Assume that all inputs (office space, telephone, and utilities) other than labor are fixed in the short run. a. Add two additional columns to the table and enter the marginal product and average product for each number of workers. b. Over what range of labor input are there increasing returns to labor? diminishing returns to labor? negative returns to labor? c. Over what range of labor input is marginal product greater than average product? What is happening to average product as employment increases over this range? d. Over what range of labor input is marginal product smaller than average product? What is happening to average product as employment increases over this range?

Explanation / Answer

a)

b) Over the range of 0-3 , there is increasing returns to labor , over the range of 4-7 , there is diminishing returns to labor and no negative returns to labor .

c) Over the range of 0-3 , the marginal product is greater than the average product . The average product is also increasing as the employment is increasing over this range .

d) Over the range of 4-7 , the marginal product is smaller than the average product . The average product is decreasing as the employment is increasing over this range .

Number of workers per week Number of repairs per week Marginal Product Average Product 0 0 1 8 8 8 2 20 12 10 3 35 15 11.66666667 4 45 10 11.25 5 52 7 10.4 6 57 5 9.5 7 60 3 8.571428571

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