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The following data is a hypothetical short-run production function: Hours of labor Total Output Marginal Product 0 _ _ 1 100 100 2 _ 80 3 240 _ The production function illustrated in the table: a) Does not incur diminishing marginal returns because the marginal product is positive for each unit of labor employed, b) Incurs diminishing marginal returns beyond the second unit of labor, c) Incurs diminishing marginal returns beyond the third unit of labor, d) Incurs diminishing marginal returns beyond the first unit of labor
The following data is a hypothetical short-run production function:
| Hours of labor | Total Output | Marginal Product |
| 0 | _ | _ |
| 1 | 100 | 100 |
| 2 | _ | 80 |
| 3 | 240 | _ |
The production function illustrated in the table:
a) Does not incur diminishing marginal returns because the marginal product is positive for each unit of labor employed,
b) Incurs diminishing marginal returns beyond the second unit of labor,
c) Incurs diminishing marginal returns beyond the third unit of labor,
d) Incurs diminishing marginal returns beyond the first unit of labor.
Expert Solution
Option d) Incurs diminishing marginal returns beyond the first unit of labor is correct.
Firstly we find the missing values in the given table.
When there are two hours of labor employed, the total output is 100 + 80 = 180
When there are three hours of labor employed, the marginal product is 240 - 180 = 60
We can see that the marginal product is reducing from 100 to 80 to 60, right from the first unit of labor employed.
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