The table below shows the production function for Teller-Morrow Auto Mechanics I

Question

The table below shows the production function for Teller-Morrow Auto Mechanics Inc. Use the information to answer questions 46 & 47: What is the marginal product of the 4th mechanic? 11 repairs 25 repairs 44 repairs 191 repairs When does the Teller-Morrow experience diminishing marginal product of labor? When they hire the 5th mechanic When they hire the 7th mechanic When they hire the 10 th mechanic Teller-Morrow does not face diminishing marginal product labor for any of the number of mechanics shown in the table

Explanation / Answer

Recall that marginal means additional, therefore what is the additional output when we employ a 4th mechanic? Well going from 3 to 4, we get a boost of 44, since 100-56 is 44. Observe that the marginal products go as such, 10, 15, 31, 44, 35, 30...and so on. What is important for us is to look at the rate of increase of the outputs. So while we increase in output when we get the 5th unit, ie the marginal output is 35, 35 is less than the boost we got from previous increases in inputs. See that the inputs kept corresponding to an increase of units, it went 10,15,31,44...each a bigger increase than before, but once we hit the 5th unit, it started increasing at a smaller rate, ie 35, 30...

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