(a)
The change in total product as the marginal product changes.
(a)
Explanation of Solution
Marginal product can be calculated using the following formula:
Substitute the respective values in Equation (1) to calculate the marginal product for variable unit 1.
The marginal product for variable unit 1 is 6.
Average product can be calculated using the following formula:
Substitute the respective values in Equation (2) to calculate the average product for variable unit
1.
The average product for variable unit 1 is 6.
Total variable cost can be calculated using the following formula:
Substitute the respective values in Equation (3) to calculate the total variable cost for variable unit 1.
The total variable cost for variable unit 1 is 1.
Average variable cost can be calculated using the following formula:
Substitute the respective values in Equation (4) to calculate the average variable cost for variable unit 1.
The average variable cost for variable unit 1 is 1.
Total cost can be calculated using the following formula:
Substitute the respective values in Equation (5) to calculate the total cost for variable unit 1.
The total cost for variable unit 1 is 3.
Average total cost can be calculated using the following equation:
Substitute the respective values in Equation (6) to calculate the average total cost for variable unit 1.
The average total cost for variable unit 1 is 3.
Marginal cost can be calculated using the following formula:
Substitute the respective values in Equation (7) to calculate the marginal cost for variable unit 1.
The marginal cost for variable unit 1 is 1.
Table-1
Units of variable input |
Total product | Marginal product | Average product | Price of input |
Total variable cost |
Average Variable cost |
Total Fixed cost |
Total Cost | Average total cost |
Marginal cost |
0 | 0 | 0 | 0 | 1 | 0 | 0 | 2 | 2 | 0 | 0 |
1 | 6 | 6 | 6 | 1 | 1 | 1 | 2 | 3 | 3 | 1 |
2 | 15 | 9 | 7.5 | 1 | 2 | 1 | 2 | 4 | 2 | 1 |
3 | 27 | 12 | 9 | 1 | 3 | 1 | 2 | 5 | 1.66 | 1 |
4 | 37 | 10 | 9.25 | 1 | 4 | 1 | 2 | 6 | 1.5 | 1 |
5 | 45 | 8 | 9 | 1 | 5 | 1 | 2 | 7 | 1.4 | 1 |
6 | 50 | 5 | 8.33 | 1 | 6 | 1 | 2 | 8 | 1.33 | 1 |
7 | 52 | 2 | 7.4 | 1 | 7 | 1 | 2 | 9 | 1.28 | 1 |
8 | 50 | -2 | 6.25 | 1 | 8 | 1 | 2 | 10 | 1.25 | 1 |
The total product of a firm decreases as its marginal product falls to negative. It is clear from Table-1 that the total product decreases from 52 to 50 as the marginal product falls from 2 to -2.
Total product: Total product refers to the total quantity of goods that is produced by a firm with available resources in a given period of time.
Marginal product: Marginal product refers to an addition to the total product, as a result of employing an additional unit of variable factor.
(b)
The relation between average product and marginal product.
(b)
Explanation of Solution
When the marginal product is greater than the average product, the average product increases. In Table-1, the average product increases up to the point where, the marginal product is greater than the average product, after that it starts to decline.
(c)
The position of average product, when the marginal product is less than the average product.
(c)
Explanation of Solution
When the marginal product is less than the average cost, the average cost begins to fall. In Table-1, a fall in marginal product from 10 to 8 leads to a corresponding fall in the average product from 9.25 to 9.
(d)
The point at which marginal product begins to decrease.
(d)
Explanation of Solution
When the average product reaches the maximum point, the marginal product begins to fall. It can be seen from Table 1, where the marginal product falls from 12 to 10 as the average product increases from 9 to 9.25.
(e)
The point at which the marginal cost begins to increase.
(e)
Explanation of Solution
In Table 1, the marginal cost is same for all units of variable inputs. This is because the input price is same for all units of production.
Marginal cost: Marginal cost refers to an addition to the total cost by employing an extra unit of worker or producing an extra unit of product.
(f)
The relationship between marginal product and marginal cost.
(f)
Explanation of Solution
Marginal product refers to an addition to the total product by employing an extra unit of input or worker. The marginal cost also refers to an addition to the total cost by producing an extra unit of output. These marginal product and marginal costs are inversely related and this relationship works on the basis of the law of diminishing returns. Marginal product initially rises and reaches at the maximum and then begins to decrease. Correspondingly, the marginal cost initially declines then reaches to a minimum point and then begins to rise. The maximum point of marginal product is corresponding to the minimum point of marginal cost.
(g)
Change in the marginal cost as the total product declines.
(g)
Explanation of Solution
Usually, the marginal cost increases when the total product begins to fall. In Table 1, the marginal cost is same for all units of inputs, where the input price is same for all units of variable factor.
(h)
The relationship between
(h)
Explanation of Solution
Marginal cost and average variable cost equals at the minimum of average variable cost. After that the average variable cost begins to rise.
Average variable cost: Average variable cost refers to the total cost as per unit of variable input.
(i)
At what level of output marginal cost and average variable cost will be equal.
(i)
Explanation of Solution
Table 1 shows that the marginal cost equals the average variable cost at all levels of output.
(j)
The relationship between
(j)
Explanation of Solution
When, the average total cost equals the marginal costs, then the average total cost begins to rise. This is because the marginal cost equals the average cost when the average cost reaches at its minimum point.
Average total cost: Average total cost refers to the total cost as per the unit of output produced.
(k)
At what level of output the marginal cost equals the average total cost.
(k)
Explanation of Solution
Marginal product does not equal the average total cost until employing 8 units of variable inputs.
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