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Chapter 7: Q 14. (page 184)

How do we calculate marginal product?

Short Answer

Expert verified

The marginal product (MP) is calculated by dividing the change in the total product by the change in the amount of the input (labor).

Step by step solution

01

Step 1. Marginal product 

Marginal product is the amount of product obtained by employing an additional unit of input (say labor).

02

Step 2. Calculation of marginal product

The marginal product (MP) can be obtained by dividing the change in the total product by the change in the amount of the input (labor). Algebraically,

MP=∆TP∆L

Where, TP = total product, L = labor,∆= change.

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Most popular questions from this chapter

How would an improvement in technology, like the high-efficiency gas turbines or Pirelli tire plant, affect the long-run average cost curve of a firm? Can you draw the old curve and the new one on the same axes?

The WipeOut Ski Company manufactures skis for beginners. Fixed costs are\(30.Fill in Table 7.16 for total cost, average variable cost, average total cost, and marginal cost.

QuantityVariable CostFixed CostTotal CostAverage Variable CostAverage Total CostMarginal Cost
0
0
\)30




1
\(10
\)30




2
\(25
\)30




3
\(45
\)30




4
\(70
\)30




5
\(100
\)30




6
\(135
\)30

What are the factor payments for land, labor, and capital?

Based on your answers to the WipeOut Ski Company in Exercise 7.3, now imagine a situation where the firm produces a quantity of 5units that it sells for a price of $25each.

a. What will be the company’s profits or losses?

b. How can you tell at a glance whether the company is making or losing money at this price by looking at average cost?

c. At the given quantity and price, is the marginal unit produced adding to profits?

Do you think that the taxicab industry in large cities would be subject to significant economies of scale? Why or why not?
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