CA Foundation · Business Economics · Theory of Production and Cost
A firm in Surat employs labour with the following data: 4 workers produce 40 units in total, and 5 workers produce 48 units in total. What are the marginal product of the 5th worker and the average product at 5 workers respectively?
Marginal product of the fifth worker is 8 units, the extra output from adding that worker (48 minus 40). Average product at five workers is 9.6 units, total output of 48 divided by 5 workers. Marginal product is below average product, so the average is falling.
- A8 units and 9.6 unitsCorrect
- B9.6 units and 8 units
- C8 units and 10 units
- D48 units and 9.6 units
Explanation
Marginal product of the 5th worker = 48 − 40 = 8 units. Average product at 5 workers = 48 ÷ 5 = 9.6 units. Option C wrongly uses the average at 4 workers (40 ÷ 4 = 10) as the average product at 5 workers, and option B swaps the two measures.
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