Economics: Total, Average, and Marginal Product

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Questions and Answers

What is the formula to calculate Total Product (TP)?

TP = AP x Labour (correct)

TP = MP / Labour

TP = Labour x MP

TP = AP + Labour

Average Product (AP) can increase if the number of labourers is doubled.

True

Define Marginal Product (MP).

The addition to total output from employing one additional unit of variable factors.

The factors of production that vary with output are known as __________ factors.

variable Signup and view all the answers

What happens to Total Product (TP) when Marginal Product (MP) becomes zero?

TP starts to decline Signup and view all the answers

Match the following terms related to product calculation with their definitions:

Total Product = Outcome of combining factors of production Average Product = Output per unit of variable factors Marginal Product = Change in output from one additional unit of input Fixed Factors = Factors that do not change with output Signup and view all the answers

If 45 tonnes of cassava are produced by 3 labourers, what is the Average Product (AP)?

15 tonnes/person Signup and view all the answers

The Average Product (AP) always follows the Marginal Product (MP) during production.

False Signup and view all the answers

What is the Law of Variable Proportion?

As more units of a variable factor are added to a fixed factor, output rises to a maximum and then starts to fall. Signup and view all the answers

Fixed factors change with the level of output.

False Signup and view all the answers

When output increases as variable factor input increases, it is known as __________.

Increasing Returns Signup and view all the answers

Calculate the Marginal Product (MP) if the total product increases from 500 tonnes to 550 tonnes when adding one extra labourer.

50 tonnes Signup and view all the answers

Match the type of return to scale with its description:

Constant Return to Scale = Output increases by the same proportion as input Increasing Returns = Output increases by a greater proportion than input Decreasing Returns = Output increases by a lesser proportion than input Signup and view all the answers

At which level of Marginal Product does Total Product reach its maximum?

When MP is equal to 0 Signup and view all the answers

As more variable factors are added, Total Product and Marginal Product both start rising at the same time.

True Signup and view all the answers

What typically happens to Marginal Product after it has peaked?

It starts to decline. Signup and view all the answers

Study Notes

Total Product (TP)

The sum of all goods produced at a specific time
Increases when variable factors increase and vice versa
Calculated by multiplying Average Product (AP) by the number of laborers

Average Product (AP)

The output per unit of variable factors (e.g. labor, raw materials)
Calculated by dividing Total Product (TP) by the number of laborers

Marginal Product (MP)

The change in total output when one additional unit of variable factor is added
Calculated by dividing the change in Total Product (TP) by the change in variable factors
Increase in TP leads to an increase in MP and vice versa

Fixed Factors

Do not change with output
Remain constant in the short run
Examples: land, machinery, tools

Variable Factors

Change in proportion to output
Increase or decrease with the output
Examples: labor, raw materials

Relationship Between TP, AP and MP

TP, AP, and MP all initially rise before decreasing
TP reaches its maximum when MP is equal to 0
AP starts to fall before MP does
TP decreases after MP becomes 0 and MP turns negative

Law of Variable Proportion

As a variable factor is added to a fixed factor, total output initially rises, then reaches a maximum, and finally decreases.
Also known as the Law of Diminishing Returns or Diminishing Marginal Productivity

Return to Scale

The relationship between proportionate changes in input and output

Types of Return to Scale

Constant Return to Scale

Input and output increase proportionally (e.g., both double)

Increasing Returns to Scale

Output increases more than proportionally to input (e.g. input doubles, output more than doubles)

Decreasing Returns to Scale

Output increases less than proportionally to input (e.g., input doubles, output less than doubles)

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Description

This quiz explores key concepts in economics related to Total Product (TP), Average Product (AP), and Marginal Product (MP). It covers definitions, calculations, and relationships between these production measures. Perfect for students studying production theory in microeconomics.