Question

PRODUCTION HOMEWORK QUESTIONS

1. What is the marginal product of labor (MP or MPP)? Why is the curve shaped the way it is?

2. Explain and describe each of the four production relationships.

3. Indicate whether each of the following are long-run or short-run choices.

Explain why. a. A law partnership signs a 5 year lease for an office complex.

b. A jeans company asks its assembly-line workers to work an extra shift this week.

c. A local oil refinery plans a complete restructuring of its production process, including relocating the plant.

d. The local college decides to offer an extra section of micro-economics this summer.

e. A farmer increases the quantity of water applied to his fields.

f. The university hires a new football coach on a three year contract.

g. The corner hot dog vender decides to buy an additional cart. In what two ways can “returns to scale” be used. Give an example of each way.

4. In what two ways can "returns to be scale" be used. Give an example of each way.

Answer 1

1. The marginal product of labor curve or MP represents the change in output as a result of change in the variabke factor of production or labor in our case.

It can also be expressed aa the first order derviate of the production function Y(L).

The MP curve is a downward sloping curve from left to right. This negatively sloped MP curve of labor is the result if the law of diminishing marginal returns.

This law states that as more and more additional unit input are added in the production process keeping all other inputs as constant or fixed, the output will initially increase by large amounts and them thits increse would be reduced until there comes a point where the additional input will start reducing the level of output instead of increasing it and as a result, the marginal product will decrease.