Total, Average, and Marginal Products of Labour (with capital fixed at two units)

Date: 2015-10-07; view: 362.

Table 4.2

Units of capital (K)

Table 4.1

A Production Function

	0
0	0
1	0
2	0
3	0
4	0
5	0
6	0										753-
7	0
8	0
9	0
10	0

These total products are reproduced in column 2 of Table 4.2 for each level of labour usage in column 1. Thus, columns 1 and 2 in Table 4.2 define a production function of the form Q - f(L, K), where K=2. In this example, total product (Q) rises with increases in labour up to a point (nine workers) and then declines. While total product does eventually fall as more workers are employed, a manager would not (knowingly) hire additional workers if he knew output would fall. In Table 4.2, for example, a manager can hire either 8 workers or 10 workers to produce 314 units of output. Obviously, the economically efficient amount of labour to hire to produce 314 units is 8 workers.

2. Comprehension check.

Are the following statements true or false? Correct the false ones.

a) Once the level of capital is fixed, changes in output must be accomplished by '
changes in the use of variable inputs.

b) No output can be produced with zero workers.

c) Seven units of labour combined with five units of capital can produce a maximum of
559 units of output.

d) A manager could employ additional workers if he knew output could fall.

e) The economically efficient amount of labour to hire to produce 286 units is eight
workers.