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Tutorial 4

(1) The document provides production data for a watch manufacturing company and asks questions about calculating average and marginal product, drawing graphs, explaining diminishing returns, and completing a production table. (2) It also includes 5 multiple choice questions related to production concepts like total product, average product, marginal product, diminishing returns, and economies of scale. (3) The production table shows that as labor increases from 1 to 10 workers, total product first increases, then increases at a decreasing rate, indicating the potential operation of the law of diminishing returns.

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38 views3 pages

Tutorial 4

(1) The document provides production data for a watch manufacturing company and asks questions about calculating average and marginal product, drawing graphs, explaining diminishing returns, and completing a production table. (2) It also includes 5 multiple choice questions related to production concepts like total product, average product, marginal product, diminishing returns, and economies of scale. (3) The production table shows that as labor increases from 1 to 10 workers, total product first increases, then increases at a decreasing rate, indicating the potential operation of the law of diminishing returns.

Uploaded by

krcxpgsb47
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Micro tut 4 Chapter 11

Written question

Assume that you are the manager of Timeless Watch Co. (TWC), a company that produces
clocks for the retail sector. The total production of your firm for the given units of labour is
shown in the table below.

No of Total Total Average Total Average Total Average Marginal


labourer product Variable Variabl Fixed Fixed Cost Total Cost
s cost e Cost Cost Cost
(TP) (TVC) Cost (TFC) (AFC) (TC) (ATC) (MC)
(QL) (AVC)
0 0
1 9
2 20
3 34
4 48
5 60
6 70
7 78
8 84
9 88
10 90

(a) Calculate the values of AP and MP in the table

(b) Present the TP, AP and MP curves graphically

(c) In less than 50 words, explain the law of diminishing returns. At what point on your
graph does the law come into operation? (Refer to the TP, AP and MP curves in your
explanation).

TWC has a fixed amount of capital and materials, with which it produces clocks. It has fixed
costs of R2000 per period. To increase the total quantity of clocks it produces (TP), it must
increase its labour (L). The wage rate is R300 per worker per period. Labour is the only
variable input.
(d) Complete columns TVC, AVC, TFC, AFC, TC, ATC, MC and plot them on your
diagram.

(e) Briefly explain why MC = AVC at the minimum point on the AVC.
MCQ question 1

Consider a firm that produces glow in the dark ice cubes. Suppose that when there are 25
workers employed, marginal product is 120.5 ice cubes per day. Average product with the
same number of workers is 98.8 ice cubes per day. Using this information, we can deduce
that:

A. Total Product is declining and Average Product is increasing.


B. Average Variable Cost is declining and Average Product is increasing.
C. Total Product is increasing and Average Product is declining.
D. Average Product is increasing and Average Variable Cost is increasing.
E. Average Variable Cost is increasing and Total Product is increasing.

MCQ question 2

If Total Product increases at an increasing rate as an additional unit of labour is employed in


the production process then

A. Marginal Product must be decreasing, but will be a positive value.


B. Average Product is at a maximum.
C. Marginal Product is negative.
D. Average Product is less than Marginal Product.
E. Average Product is negative.

MCQ question 3

When the Marginal Product is increasing:

(i) Average Product is also increasing.


(ii) the Total Cost curve is increasing at a decreasing rate.
(iii) the law of diminishing returns is not in operation yet.
(iv) Average Variable Cost is decreasing.

A. Only (i) and (ii) are correct.


B. Only (ii) and (iii) are correct.
C. Only (i), (ii) and (iii) are correct.
D. Only (i), (ii) and (iv) are correct.
E. (i), (ii), (iii) and (iv) are correct.
MCQ question 4

If TP decreases as an additional unit of labour is employed in the production process

A. Marginal Product must be decreasing, but will be a positive value


B. Average Product is at a maximum
C. Marginal Product is negative
D. Average Product is less than Marginal Product
E. Average Product is negative

MCQ question 5

In the figure below, economies of scale are present up to an output level of:

A. 5 tonnes of coffee.
B. 13 tonnes of coffee.
C. 10 tonnes of coffee.
D. 15 tonnes of coffee.
E. 19 tonnes of coffee.

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