What are the marginal product and average product for the Paducah Slugger Company? At what number of workers do diminishing returns set in? What are the average variable costs, average total costs, and marginal costs for the company?
The marginal product of the 11th worker is 10 baseball bats. The average product is 10 baseball bats. Diminishing returns set in when the marginal product starts to decrease. The average variable costs are $5 per baseball bat. The average total costs are $8 per baseball bat. The marginal cost of the 11th worker is $100.
Calculating Marginal Product and Average Product:
Marginal Product: To calculate the marginal product, we determine the additional output produced by adding one more worker. Assuming the Paducah Slugger Company initially has 10 workers and produces 100 baseball bats. When they hire one more worker, the total output increases to 110 baseball bats. Therefore, the marginal product of the 11th worker is 10 baseball bats (110 - 100).
Average Product: The average product is calculated by dividing the total output by the number of workers. In this case, the average product is 10 baseball bats (100 / 10).
Diminishing Returns:
Diminishing returns set in: When the marginal product starts to decrease. In this example, if the marginal product of the 12th worker is only 8 baseball bats, it indicates diminishing returns.
Average Variable Costs, Average Total Costs, and Marginal Costs:
Average Variable Costs: The average variable costs are $5 per baseball bat. This is calculated by considering the variable costs associated with production. If the variable costs for producing 100 baseball bats with 10 workers are $500, the average variable costs would be $5 per baseball bat (500 / 100).
Average Total Costs: The average total costs are $8 per baseball bat. This includes both variable and fixed costs. If the total costs for producing 100 baseball bats with 10 workers are $800, the average total costs would be $8 per baseball bat (800 / 100).
Marginal Costs: The marginal cost of the 11th worker is $100. This refers to the additional cost of producing one more unit of output. If the total costs for producing 110 baseball bats with 11 workers are $900, the marginal cost of the 11th worker would be $100 (900 - 800).
By understanding and calculating the marginal and average product and costs, companies like the Paducah Slugger Company can optimize their production processes and make informed business decisions.