Figure 6.2.2
-Joe owns a coffee house and produces coffee drinks under the production function q = 5KL where q is the number of cups generated per hour, K is the number of coffee machines (capital), and L is the number of employees hired per hour (labor). The average product of labor and the marginal product of labor are both equal to AP = MP = 5K. Does labor exhibit diminishing marginal returns in this case?
A) Yes, if capital also exhibits diminishing marginal returns.
B) Yes, this is true for all values of K.
C) No, the marginal product of labor is constant (for a given
K).
D) No, the marginal product of labor is increasing (for a given

Question

Figure 6.2.2
-Joe owns a coffee house and produces coffee drinks under the production function q = 5KL where q is the number of cups generated per hour, K is the number of coffee machines (capital), and L is the number of employees hired per hour (labor). The average product of labor and the marginal product of labor are both equal to AP = MP = 5K. Does labor exhibit diminishing marginal returns in this case?
A) Yes, if capital also exhibits diminishing marginal returns. 
B) Yes, this is true for all values of K. 
C) No, the marginal product of labor is constant (for a given 
K). 
D) No, the marginal product of labor is increasing (for a given

Quizplus · Accepted Answer

Since both the average product of labor and the marginal product of labor are equal to 5K, the marginal product of labor is constant (for a given K). Therefore, labor does not exhibit diminishing marginal returns in this case.

Figure 6.2.2 -Joe Owns a Coffee House and Produces Coffee Drinks Under