CA Foundation · Business Economics · Theory of Production and Cost
A firm in Rajkot uses a fixed plant and varies only labour. Output is 30 units with 3 workers, 52 units with 4 workers and 70 units with 5 workers. What are the marginal product of the 5th worker and the average product at 5 workers?
The marginal product of the fifth worker is 18 units, found as 70 minus 52, and the average product at five workers is 14 units, found as 70 divided by 5. The 22 figure is the fourth worker's marginal product, not the fifth's.
- AMP = 18 units; AP = 14 unitsCorrect
- BMP = 70 units; AP = 18 units
- CMP = 18 units; AP = 70 units
- DMP = 22 units; AP = 14 units
Explanation
MP of the 5th worker = TP at 5 minus TP at 4 = 70 − 52 = 18 units. AP at 5 workers = 70 ÷ 5 = 14 units. The option giving MP as 22 is the MP of the 4th worker (52 − 30), which is the wrong step.
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