Chapter 54, Problem 2FRQ

To determine

The graph of a production function that exhibits the marginal product of labor and the diminishing returns to labor.

Explanation of Solution

  

Quantity of labor

Quantity of labor	Quantity of output	Marginal product (changed output/changed input)
0	0	0
1	25	25
2	47	23.5
3	66	22
4	82	20.5
5	95	19
6	105	17.5
7	112	16
8	116	14.5

The horizontal axis indicates the quantity of labor and vertical axis indicates the quantity of output where the total product curve is of upward sloping which means the slope is positive but it is decreasing. It illustrates the diminishing returns to labor as with the increment of an additional unit of labor the product increases but it is less than the previous unit of labor. Marginal product curve is declining with the addition in units of labor.

Economics Concept Introduction

Introduction: Diminishing returns means by increasing the investment in any area or by increasing a factor of production, the rate of profit starts decreasing or remain constant after a certain point.