ASSIGNMENT # 03

Class: BBA 1-B

Name: NABEEL NAFEES

Enrollment: (02-111231-129)

Subject: Micro Economics

Submitted to: SIR IJLAL MANOOR

Topic: Average and Marginal Productivity,

Marginal Product and Opportunity cost.
 QUESTION NO 01:

ANSWER: To find the Average Productivity and Marginal Productivity of labor from the given
Production Table, we can use the formulas given:

AVERAGE PRODUCTIVITY: Total Productivity / Labor

MARGINAL PRODUCTIVITY: Change in Total Productivity / Change in Labor.

PART A) AVERAGE PRODUCTIVITY: To calculate the average productivity, we divide the total
productivity by the amount of labor used.

For each row, calculate the average productivity using the formula:

Average Productivity = Total Productivity / Labor

AVERAGE PRODUCTIVITY:

0/0 = 0

2/1 = 2

5/2 = 2.5

9/3 = 3

12/4 = 3

14/5 = 2.8

15/6 = 2.5

15/7 = 2.14

14/8 = 1.75

12/9 = 1.33
 PART B) MARGINAL PRODUCTIVITY: To calculate the marginal productivity, we determine
the change in total productivity and the change in labor between each row.

For each row, calculate the marginal productivity using the formula:

Marginal Productivity = Change in Total Productivity / Change in Labor

MARGINAL PRODUCTIVITY:

(2-0) / (1-0) = 2/1 = 2

(5-2) / (2-1) = 3/1 = 3

(9-5) / (3-2) = 4/1 = 4

(12-9) / (4-3) = 3/1 = 3

(14-12) / (5-4) = 2/1 = 2

(15-14) / (6-5) = 1/1 = 1

(15-15) / (7-6) = 0/1 = 0

(14-15) / (8-7) = -1/1 = -1

(12-14) / (9-8) = -2/1 = -2

QUESTION NO 02:

ANSWER:

PART A. MARGINAL PRODUCT: Marginal product refers to the additional output

produced when one additional unit of input, in this case, labor, is added while keeping other
inputs constant. If marginal product is diminishing, it means that the additional output gained
 from each additional unit of labor is decreasing. In other words, as more units of labor are
employed, the increase in total output becomes smaller. This occurs when the other inputs,
such as land in this case, are fixed or limited. Diminishing marginal productivity is a common
phenomenon in production and is a result of factors like specialization, limited resources, or
the law of diminishing returns.

PART B. An example of an opportunity cost that an accountant would not count as a cost is
the cost of using existing equipment or machinery that the firm already owns. The accountant
might ignore this cost because it does not involve any cash outflow or explicit expenditure
from the firm. Instead, the accountant focuses on explicit costs, which are actual monetary
expenses incurred by the business, to calculate profitability and financial performance. The
opportunity cost of using owned equipment is typically excluded from the cost analysis as it
does not involve a direct monetary transaction. Accountants typically focus on explicit costs,
which involve actual monetary expenditures, to measure the financial performance and
profitability of a business.

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