Determine the marginal and average products


Instructions: All your answers should be type-written. (Diagrams can be hand-drawn.) You are encouraged to work with a partner.

Part I: Production Costs in the short and long run.

1. The table below shows the total production of a firm as the quantity of labor employed increases. The  quantities of all other resources employed are constant. Compute the marginal and average products and enter them in the table.

415_Marginal and Average Products.jpg

(a) At what levels are there increasing average returns to labor and at what levels are there decreasing average returns to labor? Answer the same questions for the returns to labor at the margin.

2. Problems 2 and 6 on page 218 in the textbook.

3. Critically evaluate the following statement and explain whether the statement is true or false. (You may use a diagram to justify your position.)

"If the short-run marginal product of labor curve is decreasing, then the short-run average product of labor curve is also decreasing."

Part II: Chapter: Perfect Competition in the short run.

1. Problem (parts a - f) on page 238 in the textbook.

2. Consider the apartment rental industry in Helena, Montana. It is characterized by the following set of conditions:

i) The industry is perfectly competitive.

ii) Each apartment owner ("firm") has a set of "typically" shaped cost curves.

iii) The market demand for apartments is downward sloping.

iv) The short-run market supply of apartments is upward sloping, indicating that at higher prices more can be supplied, even in the short run, due to possible vacancies that exist in available structures.

v) All apartment buildings are the same.

vi) The industry is characterized by constant costs in the long run.


Economics- Principles, problems and Policies

By McConnell Brue Flynn

Attachment:- Short-run Production Posibilities.rar

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