# Production Theory

## Question

1. Complete the following table:

Labor Total Product Average Product Marginal Product
0                                         --                               --
1                 180
2                                                                         140
3                420
4                                        120

2. Because of your excellent economics background, you have been hired as a consultant to evaluate the operations of King Tutelage, a local non-profit organization that tutors low-income school children. To provide services, the group uses two types of workers: professional staff and untrained volunteers. Because they are in such high demand, the professional staff must be paid the going wage rate of \$25/hour for their services. While the volunteers are not paid, there is a cost to hiring them, since they need training and supervision. King Tutelage has found that they typically spend about \$10/hour for the services provided by volunteers.

While professional staff members are more expensive, they are also more productive. Based on the current employment levels, you find that the marginal product of a professional staff member is 5 (that is, 5 children per hour can be helped). In contrast, the marginal product of a volunteer is 1 (that is, only one child per hour can be helped). Given this information, is King Tutelage making the most efficient use of their resources? Have they hired the appropriate number of each type of worker? If so, how did you determine this? If not, what recommendations can you make to improve their efficiency?

## Solution Preview

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1. Complete the following table:

Labor Total Product Average Product Marginal Product
0                                            --                         --
1                 180                    180
2                 320                    160                    140...

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