Question

Difficulty: Very hardShort-Run Production and Law of Diminishing Returns

An agro-processing enterprise operates in the short run with a fixed processing plant and variable labor (LL). When 33 units of labor are employed, the average product (APAP) of labor is 21 units21\text{ units}. Adding a 4th4\text{th} unit of labor yields a marginal product (MPMP) of 25 units25\text{ units}. When a 5th5\text{th} unit of labor is hired, the average product (APAP) declines to 21 units21\text{ units}. Finally, employing a 6th6\text{th} unit of labor results in a total product (TPTP) of 114 units114\text{ units}. What is the marginal product (MPMP) of the 6th6\text{th} unit of labor?

Answer: 9 units

Answer

The marginal product of the 6th unit of labor is 9 units.
To find the marginal product of the 6th worker, we determine the total product at 5 workers (TP5=5×21=105TP_5 = 5 \times 21 = 105) and subtract it from the given total product of 6 workers (TP6=114TP_6 = 114). The difference (114105=9114 - 105 = 9) represents the additional output produced specifically by the 6th unit of labor.

Step-by-Step Solution

1
Find Total Product for 3 workers (TP3TP_3)
TP3=L3×AP3=3×21=63 unitsTP_3 = L_3 \times AP_3 = 3 \times 21 = 63\text{ units}
Total product is the product of labor units and average product.
2
Find Total Product for 4 workers (TP4TP_4)
TP4=TP3+MP4=63+25=88 unitsTP_4 = TP_3 + MP_4 = 63 + 25 = 88\text{ units}
Adding the marginal product of the 4th worker to the previous total product gives the new total product.
3
Find Total Product for 5 workers (TP5TP_5)
TP5=L5×AP5=5×21=105 unitsTP_5 = L_5 \times AP_5 = 5 \times 21 = 105\text{ units}
Multiply the 5 labor units by the given average product of 21 units.
4
Calculate Marginal Product for the 6th worker (MP6MP_6)
MP6=TP6TP5=114105=9 unitsMP_6 = TP_6 - TP_5 = 114 - 105 = 9\text{ units}
Marginal product is the change in total output resulting from employing one extra unit of variable input.

Key Concept

Short-Run Interdependence of Total Product, Average Product, and Marginal Product
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