Part 1The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital. Assume that the wage per unit of labour is $3030 and the cost of the capital is $9090.[table]
Labour per unit of time | Total Output 0 | 0
1 | 25 2 | 75 3 | 133133 4 | 208208 5 | 263263
[/table]The marginal product of labour is at its maximum when the firm changes the amount of labour hired from Part 1
A. 0 to 1 unit. B. 2 to 3 units. C. 1 to 2 units. D. 3 to 4 units. E. 4 to 5 units.

Question

Part 1The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital. Assume that the wage per unit of labour is ​$3030 and the cost of the capital is ​$9090.[table]
Labour per unit of time | Total Output 0 | 0
1 | 25 2 | 75 3 | 133133 4 | 208208 5 | 263263
[/table]The marginal product of labour is at its maximum when the firm changes the amount of labour hired from Part 1
A. 0 to 1 unit. B. 2 to 3 units. C. 1 to 2 units. D. 3 to 4 units. E. 4 to 5 units.

BlackTom AI · Accepted Answer

To approach this question, I’ll lay out the data and then compute the successive increases in output as more labour is added.
First, note the total outputs corresponding to each level of labour: 0 labour → 0 output, 1 labour → 25, 2 labour → 75, 3 labour → 133, 4 labour → 208, 5 labour → 263. This is interpreted from the table given in the prompt.
Now, calculate the marginal product of labour (MPL), which is the additional output obtained by hiring one more unit of labour:
- MPL(0→1) = 25 − 0 = 25
- MPL(1→2) = 75 − 25 = 50
- MPL(2→3) = 133 − 75 = 58
- MPL(3→4) = 208 − 133 = 75
- MPL(4→5) = 263 − 208 = 55

Reviewing these MPL values, the largest increment occurs in the step from 3 to 4 units of labour, where output rises by 75 units.
Option A (0 to 1 units) would yield an MPL of 25, which is not the maximum; it’s a relatively small gain.
Option B (2 to 3 units) has MPL = 58, still lower than the peak observed at 3→4.
Option C (1 to 2 units) gives MPL = 50, again not the maximum.
Option D (3 to 4 units) gives MPL = 75, which is the highest among all increments considered here.
Option E (4 to 5 units) yields MPL = 55, which is lower than the peak from 3 to 4.
The core idea is that the marginal product of labour is the focus: you look for the interval with the largest increase in output when adding one more unit of labour, which occurs between 3 and 4 units of labour in this data set.
Thus, the correct interval where MPL is at its maximum is the change from 3 to 4 units of labour.

Quiz:TEXTBOOK QUIZ CH 07

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