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

A workshop in Ludhiana employs labour with fixed machines. Total product at 1, 2, 3, 4 and 5 workers is 10, 24, 36, 44 and 48 units respectively. Marginal product first falls below the preceding level at which worker?

The third worker is where marginal product first falls. Marginal products are 10, 14, 12, 8 and 4 for the five workers, so it peaks at the second worker with 14 units and the third adds only 12, which signals the onset of diminishing returns.

  1. ASecond worker
  2. BThird workerCorrect
  3. CFourth worker
  4. DFifth worker

Explanation

Marginal product is the change in total product: 10, 14, 12, 8, 4. It rises up to the second worker (14) and the third worker's 12 is the first fall below the previous value. Choosing the fourth confuses a larger decline with the first decline.

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