Consider the values in the following table for the Winsome Widget Factory. A. Fi
ID: 1238255 • Letter: C
Question
Consider the values in the following table for the Winsome Widget Factory.
A. Fill in the formula for MP and AP at the top of the column in the gray section within the table.
B. Fill in the missing values for MP and AP in the blue sections of the table.
Winsome Widget Factory
Quantity of Labor
Total Output
Marginal Product of Labor
Average Product of Labor
0
0
1
600
2
1,100
3
1,500
4
1,950
5
2,250
6
2,300
7
2,275
C. Identify the point of diminishing returns. Why do diminishing returns occur?
D. Identify the production levels where increasing and negative returns occur, if any.
Winsome Widget Factory
Quantity of Labor
Total Output
Marginal Product of Labor
Average Product of Labor
0
0
1
600
2
1,100
3
1,500
4
1,950
5
2,250
6
2,300
7
2,275
Explanation / Answer
C. Part As long as this "return on investment" is increasing, keep spending! As soon as it starts to decrease (where it stops increasing - where it's dervative is zero), it is time to start looking for another investment. That is the point of diminishing returns: Where the second derivative changes from positive (increasing first derivative, increasing return on investment) to negative (decreasing first derivative, decreasing return on investment), which is where that second derivative equals zero.