Eco550 Assignment 1 - Managerial Economics and Globalization

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Assignment 1

Complete the table (Table 1) below, then draw the following curves: * Short-run average product (AP) curve;
* Short-run marginal product (MP) curve.

Table showing the Average and Marginal product of labour for a hypothetical firm

Amount of labour( units)| Amount of capital(No. of machines)| Output of parts(Q, hundreds of parts)| Average product (Q/L)| Marginal product(∆Q/∆L)| 0| 5| 0| -| -|
1| 5| 49| 49| 49|
2| 5| 132| 66| 83|
3| 5| 243| 81| 111|
4| 5| 376| 94| 133|
5| 5| 525| 105| 149|
6| 5| 684| 114| 159|
6.666| 5| 792.59| 118.90039| 163.048048|
7| 5| 847| 121| 162.9041916|
8| 5| 1008| 126| 161|
9| 5| 1161| 129| 153|
10| 5| 1300| 130| 139|
11| 5| 1419| 129| 119|
12| 5| 1512| 126| 93|
13| 5| 1573| 121| 61|
14| 5| 1596| 114| 23|
15| 5| 1575| 105| -21|

* Short-run average product (AP) curve;

* Short-run marginal product (MP) curve.

* Short-run average product (AP) curve & Short-run marginal product (MP) curve;

Use the information from the completed table and the graphs to identify the three stages of production and explain why the firm’s short run production has only one ‘rational’ stage of production.

The three stages of production include; total product, average product, and marginal product. “Total product is the total quantity of output produced with given quantities of fixed and variable inputs. TP= f (L,K). Average product is the amount of output per unit of variable input. Marginal product is the additional output produced with an additional unit of variable input” (Farnham, 2010, p.117).

The firm only has one “rational” stage of production where the two lines (AP & MP) intersect at the point where average product is at its maximum. Using the table listed above with the graphs it shows that the rational stage of production would be at 10 labour units....
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