A producer of certified organic fresh basil leaves gets the yield presented in the table below based on weekly working hours. From experience, he knows he will harvest many pounds as he increases the working hours as shown in the below table. This producer is a price taker. Because of the quality of his fresh basil, he contracts his production with a top restaurant at $14.0 per lb. while paying $ 28 per working hour. The total fixed cost is $65. Weekly Working hours (input) Change in input used Yield in lb. (TPP) Change in TPP APP MPP Total Revenue Product (TRP) Total factor cost (TFC) Profit MRP MFC 0 0 10 32 20 68
A producer of certified organic fresh basil leaves gets the yield presented in the table below based on weekly working hours. From experience, he knows he will harvest many pounds as he increases the working hours as shown in the below table. This producer is a price taker. Because of the quality of his fresh basil, he contracts his production with a top restaurant at $14.0 per lb. while paying $ 28 per working hour. The total fixed cost is $65.
|
Weekly Working hours (input) |
Change in input used |
Yield in lb. (TPP) |
Change in TPP |
APP |
MPP |
Total Revenue Product (TRP) |
Total factor cost (TFC) |
Profit |
MRP |
MFC |
|
0 |
|
0 |
|
|
|
|
|
|
|
|
|
10 |
|
32 |
|
|
|
|
|
|
|
|
|
20 |
|
68 |
|
|
|
|
|
|
|
|
|
30 |
|
108 |
|
|
|
|
|
|
|
|
|
40 |
|
144 |
|
|
|
|
|
|
|
|
|
50 |
|
176 |
|
|
|
|
|
|
|
|
|
60 |
|
196 |
|
|
|
|
|
|
|
|
|
70 |
|
212 |
|
|
|
|
|
|
|
|
|
80 |
|
216 |
|
|
|
|
|
|
|
|
|
90 |
|
218 |
|
|
|
|
|
|
|
|
|
100 |
|
214 |
|
|
|
|
|
|
|
|
|
110 |
|
204 |
|
|
|
|
|
|
|
|
|
120 |
|
200 |
|
|
|
|
|
|
|
|
Here's how each of the calculated values in the table will be derived:
Average Physical Product (APP):
This is the yield per working hour, which shows the typical pounds of basil produced each working hour. The formula is as follows:
APP = Yield in lb. (TPP) / Weekly Working Hours
Marginal Physical Product (MPP): MPP is the yield increase that results from a second hour of effort. It is determined by dividing the change in working hours (Input) by the change in yield (TPP).
MPP = ΔTPP / ΔInput
Total Revenue Product (TRP):
TRP is the total revenue generated from selling the basil produced. It is calculated as the total yield (TPP) multiplied by the price per pound ($14.0 per lb.).
- TRP = Yield in lb. (TPP) * Price per Pound
Total Factor Cost (TFC):
The total amount of money made by selling the basil that was produced is known as TRP. It is computed by multiplying the total yield (TPP) by the cost per pound ($14.0/lb).
TFC = Weekly Working Hours * Wage Rate
Profit: Profit: Profit is determined by subtracting total costs from total revenues, or TRP.
Earnings = TRP - TFC
Marginal Revenue Product (MRP):
MRP, or marginal revenue product, is the extra money made by selling the final pound of basil produced. It is determined by dividing the change in yield (TPP) by the change in total revenue (TRP).
TRP / TPP = MRP
Marginal Factor Cost (MFC):
MFC, or marginal factor cost, is the extra expense spent by hiring a second hour of work. It is determined by dividing the change in working hours (Input) by the change in total cost (TFC).
TFC / Input = MFC
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