CHAPTER 5: THE THEORY OF PRODUCTION

Activity 1
Name: ________________ Course and Year: __________
Date: __________________ Rate: ______________________

1. Complete the table below. Show the solution.

Labor input TP MP AP
1 6 6 6
2 9 3 4.5
3 14 5 4.7
4 17 3 4.3
5 22 5 4.4
6 27 5 4.5
7 29 2 4.1
8 25 -4 3.1
9 16.50 -8.5 1.8
10 10 -6.5 1
11 6 -4 .5
12 3 -3 .3
13 1 -2 .1
14 0 -1 0

TO GET THE MARGINAL PRODUCT:

TOTAL PRODUCT = MARGINAL PRODUCT                                    
LABOR INPUT
      ∆Q ∆L=MP
Solution: 9-62-1 =3
                 14-93-2= 5
                so on and so forth
To get the Average Product
TOTAL PRODUCT LABOR INPUT = AVERAGE PRODUCT
        ∆Q÷∆L=AP
Solution: 9 ÷2 =4.5 
               14 ÷3 =4.7; so on and so forth.
To get the Total Product if it is missing you can just add the 2 units of Marginal Product.
EX. 6 + 3 = 9
       6
+ 3 +
5 = 14 LABOR
35
30
25
20
15
2. Graph
10
and explain.
5
0
-5
-10
-15

Total Product Marginal Product Average Product

 Total product curve increase at an increasing rate at 6th labor. 
The law of diminishing returns was established in the 4th labor because the marginal
product has been declining ever since, except when it truly goes negative. The stage 1
with a marginal product is increasing because of specialization total product is
expanding at an increasing rate at labor 1 to 3. Because the marginal product is falling
off due to fixed resources and the law of declining marginal returns, total product is
expanding but at a decreasing rate in stage 2. The stage 3 occurs in labor 8 to 14, and
the marginal product is negative, implying that the total product is really decreasing
because the labors are in each other's way.
Activity 2
Name: ________________ Course and Year: _________
Date: __________________ Rate: ____________________

1. What are the 2 lessons in theory of production whereby law of diminishing returns state
the use of variable resources against the limits of a fixed resources. 
 The two lessons in production theory in which the rule of diminishing returns states
the utilization of variable resources vs the limits of fixed resources. The first is that,
with the remainder fixed, the size of a resource should not exceed its production
maximizing point. The second lesson is that unless technology changes, plants will be
depleted of all resources.