The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital.Assume that the wage per unit of labour is $10 and the cost of the capital is $50.
TABLE 7-3
-Refer to Table 7-3.The average product of labour when the firm hires 3 units of labour is ________.The average product of labour when the firm hires 4 units of labour is ________.
A)30; 33
B)90; 132
C)60; 42
D)90; 222
E)30; 90

Question

The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital.Assume that the wage per unit of labour is $10 and the cost of the capital is $50.
  TABLE 7-3
-Refer to Table 7-3.The average product of labour when the firm hires 3 units of labour is ________.The average product of labour when the firm hires 4 units of labour is ________.
A)30; 33 
B)90; 132 
C)60; 42 
D)90; 222 
E)30; 90

Quizplus · Accepted Answer

To calculate the average product of labor, divide the total output by the units of labor.

For 3 units of labor, total output is 90 + 99 + 105 = 294. 
Average product of labor = 294/3 = 98.

For 4 units of labor, total output is 90 + 99 + 105 + 110 = 404. 
Average product of labor = 404/4 = 101.

Therefore, the average product of labor when the firm hires 3 units of labor is 98 and when it hires 4 units of labor is 101. The closest option is (A): 30 for the first entry is not correct, but the numbers 90 and 132 for the second entry are the closest to the calculated values of 98 and 101, respectively.

The Following Data Show the Total Output for a Firm