ECON101 Lecture Notes - Lecture 19: Diminishing Returns, Marginal Product

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indigomacaw960

2 Nov 2016

School

University of Waterloo

Department

Economics

Course

ECON101

Professor

Emanuel Carvalho

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Document Summary

The quantity of at least one factor of production remains constant or it is fixed, there could be more but there is at least one. Assume that the fixed factor of production is 1 unit of land and the variable factor of production is labour. Total product (tp)- overall output produced during a specified period of time by combining or mixing fixed and variable factors of production. Total product or total output will vary directly with employment of the variable input (labour: average product (ap)- per unit product we obtain unit product by dividing total product divided by the corresponding variable input. Ap= tp divided by labour: marginal product (mp)- the addition to total product attributed to the employment of each additional unit of variable input. To calculate mp = change in total product divided by the corresponding change in variable input. For example you would take the change in tp divided by the change in labour.

Related Questions

Use the following information on a hypothetical short-run production function to answer questions A-C.

The price of labor is $20 per day.

Ten units of capital are used each day, regardless of output level.

The price of capital is $50 per unit.

(A). Calculate the marginal product (MP) and average variable product (AP) of each unit of labor input.
(B). Calculate total (TC), average total (ATC), average variable (AVC), and marginal costs (MC).
(C). Can you tell where diminishing marginal returns sets in?

Labor (L)	Output (Q)	MP	AP	TC	ATC	AVC	MC
5	120	--					--
6	140
7	155
8	165
9	168

harlequinotter496

The law of eventually diminishing marginal returns: (Points : 1)

a. states that each and every increase in the amount of the variable factor employed in the production process will yield diminishing marginal returns.
b. is a mathematical theorem that can be logically proved or disproved
c. is the rate at which one input may be substituted for another input in the production process
d. None of the above

The marginal product is defined as: (Points : 1)

a. the ratio of total output to the amount of the variable input used in producing the output
b. the incremental change in total output that can be produced by the use of one more unit of the variable input in the production process
c. the percentage change in output resulting from a given percentage change in the amount of the variable input X employed in the production process with Y
d. None of the above

The rate at which one input X may be substituted for another input Y in a production process, while total output remains constant, is: (Points : 1)

a. the slope of the isoquant curve
b. the marginal rate of technical substitution

c. equal to MPx/MPy

d. all of the above
e. none of the above

Marginal revenue product is: (Points : 1)

a. defined as the amount that an additional unit of the variable input adds to the total revenue
b. equal to the marginal factor cost of the variable factor times the marginal revenue resulting from the increase in output obtained
c. equal to the marginal product of the variable factor times the marginal product resulting from the increase in output obtained
d. a and b
e. a and c

Marginal factor cost is defined as the amount that an additional unit of the variable unit of the variable input adds to ____________. (Points : 1)

a. marginal cost
b. variable cost
c. marginal rate of technical substitution
d. total cost
e. none of the above

In the Cobb-Douglas production function Q=aL^?1.K^?2 ______________. (Points : 1)

a. the marginal product of labor (L) is equal to ?1
b. the average product of labor (L) is equal to ?2
c. if the amount of labor input (L) is increased by 1 percent, then output will increase by ?1 percent
d. a and b
e. a and c