4. Total, average, and marginal product
Underground Sandwiches, a sandwich shop, has the following marginal physical product curve (labeled Correct Answ er
) for its hourly production.
Your Answ er
20
MPP and AP (Sandwiches per hour)
18
AP
16
14
12
10
8
6
MPP
4
2
0
0
1
2
3
4
5
QUANTITY OF LABOR
Points:
0 / 1
Points:
0 / 1
When labor increases from three to four workers, total product increases by 11 sandwiches per hour.
Explanation:
Close Explanation
When the quantity of labor increases from three to four workers per hour, marginal physical product equals 11 per worker; therefore, total
product must have increased by 11 sandwiches per hour.
Use the orange points (square symbol) to plot the production function on the following graph. Line segments will automatically connect the points.
Assume that if there are no workers, Underground Sandwiches does not have any output. Be sure to plot from left to right.
Correct Answ er
Your Answ er
TOTAL PHYSICAL PRODUCT (Sandwiches per hour)
60
54
TPP
48
42
36
30
24
18
12
6
0
0
1
2
3
4
5
QUANTITY OF LABOR
Points:
Explanation:
0 / 1
Close Explanation
Because there is no output when zero workers are hired, the production function starts at the origin. According to the marginal physical
product curve (MPP), adding the first worker yields a marginal physical product of 12, so (1, 12) is a point on the production function. The
second worker contributes a marginal physical product of 18, so total product increases
to . Therefore, (2, 30) is the next point on the production function. The following
table summarizes the rest of the calculations:
Workers
Marginal Physical Product
0
Total Physical Product
0
1
12
12
2
18
30
3
15
45
4
11
56
5
4
60
On the graph showing the marginal physical product curve (MPP), use the purple points (diamond symbol) to plot the average product curve (AP) at one,
two, three, four, and five workers. Line segments will connect the points automatically. Be sure to plot from left to right.
Explanation:
Close Explanation
According to the marginal physical product curve, adding the first worker yields a marginal physical product of 12, so the average product
of hiring one worker per hour is . Thus, (1, 12) is a point on the average product curve. The
second worker contributes a marginal physical product of 18, so total product increases
to is . The average product of hiring two workers
; therefore, (2, 15) is another point on the average product curve. Using similar
calculations, you can find the rest of the points on the average product curve.
Workers
Marginal Physical Product
0
Total Physical Product
Average Product
0
0
1
12
12
12
2
18
30
15
3
15
45
15
4
11
56
14
5
4
60
12
The marginal physical product curve (
average product
) and average product curve (
) always intersect at the maximum of the
curve.
Points:
Explanation:
1 / 1
Close Explanation
The marginal physical product curve intersects the average product curve at the point of maximum average product, where average
product is neither increasing nor decreasing. This is because when marginal product exceeds average product, so that an additional
worker adds more to total output than workers previously produced on average the average product rises; whereas when marginal
product is below average product so that an additional worker adds less to output than workers previously produced on average, average
product is dragged down. When marginal product and average product are equal (the point of intersection of and ), an additional
worker adds an amount of output equivalent to output per worker; hence, average product is unchanged. At this point, marginal product
no longer exerts upward pressure on average product, but it has not yet started to exert downward pressure either. Thus, average
product is at a maximum.