Complete the following table using the information provided

1) Marginal product = change in total product / change in labour

-

20

30

40

30

-20

Average product = Total product / labour

-

20

25

30

30

20

Law of diminishing returns states that as more of variable input is added to production, marginal product of the variable input eventually declines.

Here, marginal product of labour is increasing till 3 units of labour is hired. From 4 th labour onwards it started to fall . when fifth labour was hired it became negative. Average product has also experienced a fall when 5th unit of labour was used.

22) Since the marginal product has become negative, its very much evident that production is exhibiting diminishing returns. So top management should stop hiring more workers. Hiring more workers will only lead to further decline in marginal product.