Chapter 7, Problem 1E

a)

To determine

To evaluate the value of total product and marginal product and average product of labor of the Dmining company in the given table.

Explanation of Solution

Labor input L	Total product TP	Marginal product MP	Average product AP
1	3	-	3
2	6	3	2
3	16	10	5.33
4	29	13	7.25
5	43	14	8.6
6	55	12	9.16
7	58	3	8.28
8	60	2	7.5
9	59	-1	6.5
10	56	-3	5.6

From the given data Average Product, Total Product, and marginal product has been calculated. Capital is set at 500. The total product is production, the marginal product contributes to the overall output, and the average labor product is the overall labor dividedproduct. Thus from 1-6 shows increasing rate, decreasing rate from 6-8 and negative rate of production from 9-10.

Economics Concept Introduction

Introduction:  Production functions play a significant role in determining the price of the output. It helps the producer to calculate how much inputs are needed to generate a particular amount of output. So, the producer can make decision based on cost minimization.

b)

To determine

To ascertain the total product, marginal product and average product functions.

Explanation of Solution

  

Economics Concept Introduction

Introduction: Development is aimed at producing goods and services that satisfy people's needs as per their demand. Four considerations for goods and services development are as follows: land and other natural resources, such as water, trees, minerals etc.

c)

To determine

To evaluate the boundaries of the three stages of production.

Explanation of Solution

Stage 1 from point 0-5 shows increasing rate in total production of output, stage 2 from point 5-9 shows decreasing rate in total production and in the stage 3 from point 9-11 shows negative rate in total production of output.

Economics Concept Introduction

Introduction: Economists accept three distinct stages of development identified by a principle known as the law of rising marginal returns. This law states that if you add more workers to the manufacturing process, the output will increase but the scale of that increase will be smaller for each worker.