Answers:

(a) Over what ranges of workers are there (i) increasing, (ii) constant, (iii)decreasing, and (iv)
negative returns?

Ans.:

Crew Size Amount of Fish Caught/Week MP, hundreds of LBS

(No. of Workers) (Hundreds of Lbs)
2 3 -
3 6 3
4 11 5
5 19 8
6 24 5
7 28 4
8 31 3
9 33 2
10 34 1
11 34 0
12 33 -1

As we already know, marginal product (MP) of an input is the extra output that can be produced
by using one more unit of the input. For example, the difference in output when a firm’s labour
usage is increased from five to six units. And, assuming that the quantities of no other inputs to
production changes.

(i) From the table above, we can see an increasing returns in the range from 2 to 5
workers, i.e., when MP increases.
(ii) Similarly, by looking at the table above, we cannot see the constant returns in our
case, this is because MP is not constant in any range.
(iii) Again, we can see decreasing returns in the range from 5 to 12 workers, i.e., when
MP decreases.
(iv) Lastly, as depicted on the table above, we can see negative returns, i.e., when the
number of workers equals 12, in this point, the MP is negative (MP= -1).
(b) How large a crew should be used if the trawler owner is interested in maximizing the total
amount of fish caught?

Ans.:

Crew Size Amount of Fish Caught/Week MP, hundreds of LBS

(No. of Workers) (Hundreds of Lbs)
2 3 -
3 6 3
4 11 5
5 19 8
6 24 5
7 28 4
8 31 3
9 33 2
10 34 1
11 34 0
12 33 -1

The marginal product (MP) of an input is the extra output that can be produced by using one
more unit of the input i.e., the difference in output when a firm’s labour usage is increased from
five to six units. And, assuming that the quantities of no other inputs to production change.

Thus, the total output is maximized, when MR>0, before it becomes zero or negative, so as we
can see from the table above, 10 workers should be used if the trawler owner is interested in
maximizing the total amount of fish caught.
(c) How large a crew should be used if the trawler owner is interested in maximizing the average
amount of fish caught per person?

Ans.:

Crew Size Amount of Fish MP, hundreds AP, hundreds of LBS

(No. of Caught/Week of LBS
Workers) (Hundreds of Lbs)

2 3
3 6
4 11
5 19
6 24
7 28
8 31
9 33
10 34
11 34
12 33
- 1.5
3 2
5 2.75
8 3.8
5 4
4 4
3 3.875
2 3.67
1 3.4
0 3.09
-1 2.75

In most cases, average product usually abbreviated (AP), which can be computed by dividing
total product (TP) i.e., quantity of fish (Q), by the quantity of variable input i.e., number of
workers (N).

Therefore: AP=Q/N.

In this scenario, average product (AP) is maximized, when 6 or 7 workers are used, in order to
avoid using excess workers, 6 workers should be used if the trawler owner is interested in
maximizing the average amount of fish caught per person.
(d) Suppose the owner of the trawler can sell all the fish caught for $75 per 100

pounds and can hire as many crew members as desired by paying them $150

per week. Assuming that the owner of the trawler is interested in maximizing

profits, determine the optimal crew size.

Ans.:

Crew Size Amount of MP, AP, TR=$75*Q TC=$150*N TP=TR-TC

(No. of Fish hundreds of hundreds of
Workers) Caught/Week LBS LBS
(Hundreds of
Lbs)
2 3 - 1.5 $225.00 $300.00 -$75.00
3 6 3 3 $450.00 $450.00 $0.00
4 11 5 5.5 $825.00 $600.00 $225.00
5 19 8 9.5 $1 425.00 $750.00 $675.00
6 24 5 12 $1 800.00 $900.00 $900.00
7 28 4 14 $2 100.00 $1 050.00 $1 050.00
8 31 3 15.5 $2 325.00 $1 200.00 $1 125.00
9 33 2 16.5 $2 475.00 $1 350.00 $1 125.00
10 34 1 17 $2 550.00 $1 500. 00 $1 050.00
11 34 0 17 $2 550.00 $1 650.00 $900.00
12 33 -1 16.5 $2 475.00 $1 800.00 $675.00

P=$75 per 100 LBS; w=$150 per worker.

Therefore, Total profit equals: TP=TR-TC, TC=N*w, TR=P*Q,

Therefore, where TR=total revenue; TC= total cost; P= price; Q= hundreds of LBS; W= fish
salary; N= number of workers.

Thus, the maximal profit is $1125, when 8 or 9 workers are used. In order to avoid excess costs
by using additional workers and assuming that the owner of the trawler is interested in
maximizing profits, the optimal crew is 8 workers, when the profit equals $1125.