Exercise 1

Filled table:
Labor
(L)
3
4
5
6

Capital
(K)
8
8
8
8

Production (Q)

Average Product of Labor

Marginal Product of Labor

33
36
40
45

11
9
8
7.5

nd
3
4
5

Formulas used:
Average product of labour = production/labour
Marginal product of labour (for n labours) = production (for n labours) - production (for n-1
labours)
Graph for Q vs L

Production (Q)
45
40
33

36

Graph of APL vs MPL:

Average Product of Labor 11
Marginal Product of Labor nd

9
8

7.5
5

4
3

Thus we see that when MPL increases, APL decreases.

This is because, If the marginal product of labour, MPL , is greater than the average product of
labor, APL , then each additional unit of labour is more productive than the average of the
previous units. Therefore, by adding the last unit, the overall average increases. If MPL is
greater than APL , then APL is increasing.
If on the other hand MPL is lower than the APL , then the last unit reduces the average. The
APL is at a maximum when the productivity of the last unit is equal to the average of the
previous units ( i.e., when MPL = APL ).