WAEC Economics 2020 Theory — Question 1

Model answer

(a) Average product = Total product / number of workers. Thus, total product = average product x number of workers. For the 6th worker: X = 11.7 x 6 = 70.2, approximately 70 (whole number). Marginal product = (TPn - TPn-1)/(Ln - Ln-1). For the 4th worker: Y = (80-70)/(4-3) = 10. For the 6th worker: Z = (X-80)/(6-5) = (70-80)/1 = -10 (approx -9.8 to 2dp as given, confirming Z relates to the marginal product formula between the 5th and 6th worker). (b) (i) Increasing returns occur when total output increases as input (labour) increases — from the table, this occurs from the 1st to the 3rd labour employed. (ii) Decreasing returns occur when output increases at a decreasing rate as more variable input is added — occurs from the 4th labour employed (marginal product starts falling but remains positive). (iii) Negative returns occur when the marginal product becomes negative — this occurs when the 6th labour is employed (marginal product = -9.8, i.e. total output falls). (c) The law of diminishing returns states that as more units of a variable input (e.g. labour) are combined with a fixed factor (e.g. land/capital), the total output will initially increase at an increasing rate, then increase at a decreasing rate, and eventually decline, holding technology constant. (d)(i) [Graph: plot Total Product (TP) and Marginal Product (MP) against number of workers on the same axes — TP rises, reaches a maximum, then falls; MP rises, peaks earlier, crosses zero where TP is at its maximum, and becomes negative as TP falls.] (ii) Relationships between the curves: When the marginal product curve is positive, the total product curve is increasing. When the marginal product curve becomes negative, the total product curve starts decreasing (the TP curve reaches its maximum when MP = 0).