CMA Foundation · Fundamentals of Business Economics and Management · Theory of Production
A bakery in Indore uses one oven (fixed) and varies labour. Total product for 1, 2, 3, 4, 5 workers is 10, 24, 36, 44, 48 units respectively. At which number of workers does the marginal product first begin to diminish?
Marginal product is 10, 14, 12, 8 and 4 for successive workers. It peaks at the second worker and first declines at the third worker, so diminishing marginal returns begin with 3 workers.
- A2 workers
- B3 workersCorrect
- C4 workers
- D5 workers
Explanation
Marginal products are: 1st worker 10, 2nd 14, 3rd 12, 4th 8, 5th 4. MP rises up to the 2nd worker (14) and falls first at the 3rd worker (12). Choosing 2 workers confuses the maximum MP point with the first fall.
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