Question

Microeconomics:

The increased of employees in Café Explorer from 2 to 8 is associated with the corresponding level of production of café latte of 80, 90, 100, 109, 115, 115, 114.

a. Calculate the marginal product of employee.

b. Explain whether this production functions exhibits increasing marginal productivity of labour?

Please write clearly :)

Answer 1

a.

Number of employees	Total product	Marginal product
2	80	-
3	90	10 (90 - 80)
4	100	10 (100- 90)
5	109	9 (109 - 100)
6	115	6 (115 - 109)
7	115	0 (115 - 115)
8	114	-1 (114 - 115)

Marginal product of employes is the change in total product when one more employee is hired. MP= TP_n - TP_n-1

b. Since the marginal product keeps on decreasing as more and more employees are hired, this production function exhibits decreasing marginal productivity of labor. This means that as labour use increases the amount of extra output that is gained from an increase in labour input becomes smaller.