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?