The table above shows the weekly relationship between output and numbe

The table above shows the weekly relationship between output and number of workers for a factory with a fixed size of plant.

a. Calculate the marginal product of labor.
b. At what point does diminishing returns set in?
c. Calculate the average product of labor.
d. Find the three stages of production.

ANSWER

Number of Workers Output MPL APL
0 0 — —
1 50 50 50
2 110 60 55
3 300 190 100
4 450 150 112.5
5 590 140 118
6 665 75 110.83
7 700 35 100
8 725 25 90.63
9 710 -15 78.89
10 705 -5 70.5

a. See table.
b. Diminishing returns sets in after the third worker is hired.
c. See table.
d. Stage I is between the first and approximately the 5th worker (until APL is maximized); Stage II is from the 5th worker to the 8th worker (MPL still positive), and Stage III begins with the hiring of the 9th worker (MPL becomes negative).