Assessment Task for Optimum Input Usage

1. The following data describes a short run production function for a garment company that hires
workers to sew ready to wear dresses. Complete the table below and identify the stages of
production.
Show solutions.

Q of L TP MP Stages of Production

0 0

10 50

20 150

30 300

40 550

50 700

60 800

70 850

80 850

90 800

2. Complete the firm’s production table below assuming that the price of the product is P50 and
workers are paid P250 per period of time. Show solutions.

Q TP MP MRP MRC

10 1300
 20 2500

30 3450
40 3950

50 3200

a. To maximize profit, how many workers should this firm hire? Justify your answer.

b. How will the hiring decision change (how many workers must be hired) if workers successfully
demanded for an increase in wage to P475 while price remained the same?

Q TP MP MRP MRC

10 1300
20 2500

30 3450
40 3950

50 3200 -

c. Complete the table if price goes up to P100 and wage remained at P475. How will an increase in the
price of the product affect the firm’s hiring decision (how many workers must be hired)? Hint: Draw the
MRP and MRC curve to answer this.

Q TP MP MRP MRC

10 1300
20 2500

30 3450
40 3950

50 3200 -