What is relationship between MP and AP? Explain why MP first rises, then declines and ultimately becomes negative? (c) Whether the above phenomenon is long run or short run and why? (d) Does law of diminishing marginal returns holds in above scenario? Why and why not.

What is relationship between MP and AP? Explain why MP first rises, then declines and ultimately becomes negative? (c) Whether the above phenomenon is long run or short run and why? (d) Does law of diminishing marginal returns holds in above scenario? Why and why not.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter7: Production, Costs, And Industry Structure

Section: Chapter Questions

Problem 22RQ: What are diminishing marginal returns as they relate to costs?

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Question

(a) Complete the following table and draw the corresponding graphs.

Capital inputs	Labor inputs	Total product	Average product	Marginal product
20	0	0
20	1	15
20	2	34
20	3	51
20	4	65
20	5	74
20	6	80
20	7	80
20	8	75

(b) What is relationship between MP and AP? Explain why MP first rises, then declines and ultimately becomes negative?

(d) Does law of diminishing marginal returns holds in above scenario? Why and why not.

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