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CMA Foundation · Fundamentals of Business Economics and Management · Theory of Production

A bakery in Pune uses 1 oven and varies the number of workers. Total product (loaves per day) is: 1 worker 40; 2 workers 100; 3 workers 150; 4 workers 180; 5 workers 190. At which number of workers does the marginal product first start to fall?

Marginal product first falls at the 3rd worker. The marginal products are 40, 60, 50, 30 and 10 for workers one to five. MP rises up to the 2nd worker at 60 and then declines to 50, so diminishing returns begin there.

  1. A2nd worker
  2. B3rd workerCorrect
  3. C4th worker
  4. D5th worker

Explanation

Marginal products are: 1st = 40, 2nd = 60, 3rd = 50, 4th = 30, 5th = 10. MP rises from 40 to 60 at the 2nd worker, then first falls to 50 at the 3rd worker. Choosing the 4th or 5th confuses the start of the fall with later falls.

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