CA Foundation · Business Economics · Theory of Production and Cost
A firm using fixed machinery has the following data: with 6 workers, average product is 15 units; with 7 workers, marginal product of the 7th worker is 29 units. The average product with 7 workers is:
Total product with six workers is 6 × 15 = 90 units. Adding the seventh worker's marginal product of 29 gives 119 units. Dividing by seven workers gives an average product of 17 units, which is above 15 because marginal product exceeds average product.
- A17 unitsCorrect
- B22 units
- C15 units
- D14.5 units
Explanation
TP at 6 workers = 6 × 15 = 90. TP at 7 workers = 90 + 29 = 119. AP at 7 = 119 ÷ 7 = 17. Option 22 is the simple average of 15 and 29 (wrong method), and 15 wrongly assumes AP does not change. Check: 17 × 7 = 119.
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