diminishing marginal returns

2008-12-23 7:00 pm
The following table shows the monthly roduction of a firm with two inputs, labour and machines.

machines labour total output
(units) (units)

1 3 18
1 4 28
1 5 40
1 6 50
1 7 X

If the law of diminishing marginal returns applies to the firm, X
A must be smaller than 50.
B can be any value greater than 50
C must be smaller than 60
D is equal to 60

(I don't know how to do this question, can you explain the answer one by one?pls.)

回答 (3)

2008-12-23 7:23 pm
✔ 最佳答案
The answer is C

Since the law of diminishing marginal returns applies to the firm, at some point, the marginal output must keeping on decreasing when additional unit of labor is added.

In fact, this question does not involve any difficult calculation. Based on the above info., we can discover the following things:

Labor Marginal output
3 18-0=18
4 28-18=10
5 40-28=12
6* 50-40=10

* When there are 6 units of labor, the marginal output decrease from 12 units to 10 units.

Therefore, when additional one unit of labor is added (i.e. L=7), the marginal output must less than 10 units. As a result, the total output must be smaller than 60 units; the answer is C

The above issue is because the number of machine does not match with the number of labor, and this leads to a decrease in marginal output. If the number of machine are not added, the marginal output would be negative ultimately.
2008-12-23 7:51 pm
總產出 由18到28 多了10個.由28到40多了12,由50到40多了10個.

由於問題係問邊際遞減,而問題提供了最初的邊際生產為10個(當工人由3個到4個),跟住多一個工人時邊際生產為12個,即這時未遞減,到增加工人到了6個時,邊際產出只有10個產品,即開始出現遞減,所以工人再多一個時,邊際產出一定比10更小.所以總產出一定小於60.即答案係 c
2008-12-23 7:39 pm
Diminishing marginal returns
means when you have only one machine and then you can add labour to increase more production at the begaining, if you add too much more labour output will not increase as fast as at the begaining.

1) Output is 28,
Add one labour, output increase by 10;

2) When you add more labour ,
add one labour, output increase by 12;

3) When add one more labour, output is 50,
one labour increase 10 output only;
Increase of output due to the labour increase
is diminishing(i.e. reducing)!

4) By now you can see the output increase is less than before
when you add one more labour.
So the increase of output
must be less then the previous one which is 10.

Output will be 50 + x, x must be less then 10 as before ,
so output must be less than 50+10 which is 60.

Answer is C.


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