1. Suppose a business finds that output varies according to the following schedu

Question

1. Suppose a business finds that output varies according to the following schedule as it adds more workers:

Workers Total Product Marginal Product Average Product
0 0 —
1 10 10
2 25 12.5
3 42
4 58
5 70
Fill in the marginal product and average product columns. Diminishing marginal returns is encountered with the addition of which worker?

2. Notice that average product (that is, output per worker) continues to rise after marginal product has fallen. Why? How can it be that output per worker can rise after the point of diminishing returns has been encountered?

Explanation / Answer

1, ANSWERS ( in correct order) 1 10 10 2 25 12.5 3 42 14 4 58 14.5 5 70 14 Diminishing marginal returns is encountered with the addition of 5th worker 2. More labor means more hand to produce more, but there comes a point where the resources are limited hence they reach saturation and cannot produce more output, after that increasing the no . of workers will only decrease net profit as the PAY u give them, but output will reach stagnation. Maximum profit point lies much before the stagnation.

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