CA Foundation · Business Economics · Theory of Production and Cost
A workshop in Rajkot has the following total product of labour: 1 worker = 12 units, 2 workers = 28 units, 3 workers = 42 units. What is the average product with 3 workers and the marginal product of the 3rd worker?
Average product is 14 units and marginal product of the third worker is 14 units. AP equals total product 42 divided by 3 workers, and MP equals the rise in total product from 28 to 42 units when the third worker is added.
- AAP = 14, MP = 14Correct
- BAP = 14, MP = 42
- CAP = 12, MP = 14
- DAP = 14, MP = 10
Explanation
AP at 3 workers = 42/3 = 14. MP of the 3rd worker = TP3 - TP2 = 42 - 28 = 14. Hence both equal 14, which also means AP is at its maximum there. Dividing 42 by 3 for MP, or using the wrong difference, gives the other options.
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