1. What is the difference between explicit and implicit costs? Which of the costs is most closely associated with opportunity costs and why? Give three examples of each type of costs that you have incurred over the past 30 days. (10)
b. State and explain the law of diminishing returns. How might this law apply if you were studying for an examination for an online course? (15)
c. We do not stop working (or, stop studying for an exam) simply because we run into diminishing returns. Why is that? (10)
d. Explain the relationship between AP and MP. Be sure to state how they relate to each other when the MP is greater than, equal to and less than the AP. (15)
e. Suppose that 0 workers generate 0 output, 1 worker generates 8 units of output, 2 workers generate 20, 3 workers generate 35, 4 workers generate 45, and 5 workers generate 47 units of output, 6 workers generate 47 units of output, while 7 workers generate 44 units of output. Show all work.
f. Calculate the MP and the AP for each worker (15)
g. At what point do diminishing returns set in? How would we know this had occurred? (5)
h. Clearly and accurately graph the TP curve, MP curve, AP curve based on the above data (30)
1. What is the difference between explicit and implicit costs? Which of the costs is most closely associated with opportunity costs and why? Give three examples of each type of costs that you have incurred over the past 30 days. (10)
b. State and explain the law of diminishing returns. How might this law apply if you were studying for an examination for an online course? (15)
c. We do not stop working (or, stop studying for an exam) simply because we run into diminishing returns. Why is that? (10)
d. Explain the relationship between AP and MP. Be sure to state how they relate to each other when the MP is greater than, equal to and less than the AP. (15)
e. Suppose that 0 workers generate 0 output, 1 worker generates 8 units of output, 2 workers generate 20, 3 workers generate 35, 4 workers generate 45, and 5 workers generate 47 units of output, 6 workers generate 47 units of output, while 7 workers generate 44 units of output. Show all work.
f. Calculate the MP and the AP for each worker (15)
g. At what point do diminishing returns set in? How would we know this had occurred? (5)
h. Clearly and accurately graph the TP curve, MP curve, AP curve based on the above data (30)
Related textbook solutions
Related questions
Given the following information for Mary's taco shop (TP, AP, and MP are measured in tacos):
|
Labor (L) |
Total Product (tacos) (TP) |
Average Product (tacos) (AP) |
Marginal Product (tacos) (MP) |
|
0 |
0 |
-- |
-- |
|
1 |
|
|
20 |
|
2 |
|
25 |
|
|
3 |
|
|
50 |
|
4 |
150 |
|
|
|
5 |
|
36 |
|
|
6 |
200 |
|
|
|
7 |
|
30 |
|
|
8 |
210 |
|
|
a) Fill in the blanks above. (Round each answer to the nearest taco)
Please note there are no numbers for MP and AP when output is zero tacos.
b) Define the law of diminishing marginal returns.
c) At which worker (labor) does diminishing returns start? Please explain the reasoning behind your answer.
d) If each taco could be sold for $4 per taco, and each worker is paid $70 per day then, assuming that labor is the only cost of production, how many workers should Mary hire in order to maximize profits? Please explain the reasoning behind your answer.
The table below describes the total product of a firm. Fill in the missing values, a) - u), by calculating marginal product and average product.
| 1 | 2 | 3 | 4 |
| Units of the variable resource (Capital) | Total Product (TP) | Marginal Product (MP) | Average Product (AP) |
| 0 | 0 | a | - |
| 1 | 1 | b | l |
| 2 | 3 | c | m |
| 3 | 6 | d | n |
| 4 | 10 | e | o |
| 5 | 15 | f | p |
| 6 | 18 | g | q |
| 7 | 20 | h | r |
| 8 | 19 | i | s |
| 9 | 17 | j | t |
| 10 | 13 | k |
u |
Refer to the table from above.
a. List the units of capital exhibit increasing marginal returns?
b. List the units of capital exhibit decreasing marginal returns?
c. List the units of capital exhibit negative marginal returns?
8. Describe how the total product and average product curves change as a firm moves from increasing to diminishing to negative marginal returns.
9. Does the law of diminishing returns mean that, as a firm hires additional workers, each of those workers is successively worse at doing their job? Why or why not?
