Principles-of-Microeconomics-Chapter-17
Principles-of-Microeconomics-Chapter-17
Your friend has a large garden and grows fresh fruit and vegetables to
be sold at a local “farmer’s market”. Your friend comments, ‘I hired a
college student who was on summer vacation to help me this summer and my
production more than double. Next summer, I think I’ll hire two or
maybe three helpers and my output should go up more than three or
fourfold.’
1. If all production processes eventually exhibit
diminishing marginal product of the variable inputs, could it be true
that your friend hired a helper (doubled the labor) and more than
doubled his production? Why?
2. Is it likely that he could hire more workers and continue to reap greater than proportional increases in production? Why?
3. In the long run, what must your friend do to the scale of his operation
if he wants to continue to hire workers and have those workers generate
proportional increases in production? Explain?
4. Even in the long run, could your friend expand his scale of operation forever and
continue to keep average total cost at a minimum? Explain?
