Marginal Production Level Case Study

The time has come for you to go to college and move from your parent's home. You are moving approximately 300 boxes from your parent's house to the school dorm and need to hire some help. The moving company has given you the following production table.
Number of Workers Total Product of Labor Average
Production Level
(per hour)
(boxes per hour)
0
0
1
20
2
46
3
66
4
80
5
85

Marginal
Production Level

Complete the table and determine the most efficient number of movers to hire. Explain. (Be sure to discuss average production and marginal production levels.) Does the production function in the table exhibit diminishing marginal returns? Explain what you think is happening.

Solution:
Number of Workers Total Product of Labor Average
(per hour)
(boxes per hour)
Production Level
0
0
−−
20
1
20
= 20
1
46
2
46
= 23
2
66
3
66
= 22
3
80
4
80
= 20
4
85
5
85
= 17
5

=

!"

Marginal
Production Level
−−
(20 − 0)
= 20
(1 − 0)
(46 − 20)
= 26
(2 − 1)
(66 − 46)
= 20
(3 − 2)
(80 − 66)
= 26
(4 − 3)
(85 − 80)
=5
(5 − 1)

# $

In other words Average production level gives information about the work obtained by each
labor.
Marginal production level is an economics term which is used to describe the additional output obtained due to addition of more unit of an input. In other words, effect of last addition of input to the total production is known as marginal production level. Marginal product is an important concept used to analyze short-run run production. We can calculate marginal product by dividing the change in the total product by the change in the variable input.
The following figure depicts the graph of Average and Marginal production ion level.
Average production level and M
Marginal product level stats that that the change in the average product depends on a comparison between the average product and marginal product.
•
•
•

If marginal product is less than average product, then average product declines.
If marginal product is greater than average product, then average product rises.
If marginal product is equal to average product, then average product does not change. change The addition of input (labor) is worth till we get increase in production level. As we can see
from the table above increasing labor from 1 to 2 we get increase in production from 20 to 23.
Afterwards increase inn labor doesn doesn’t increase in average production level on the other hand it reduces significantly.
Diminishing marginal returnss is the decrease in the marginal (incremental) output of a production process as the amount of a single factor of production is incrementally increased, while le the amounts of all other factors of production stay constant.
This production process exhibits diminishing returns to labor. The marginal product of labor, the extra output produced by each additional worker, diminishes as workers are added.