You operate a car detailing business with a fixed amount of machinery (capital), but you have recently altered the number of workers that you employ per hour. Three employees can generate an average product of 4 cars per person in each hour, and five employees can generate an average product of 3 cars per person in each hour. What is the marginal product of labor as you increase the labor from three to five employees?
A) MP = 3 cars
B) MP = 1.5 cars
C) MP = 15 cars
D) MP = -1 cars

Question

Quizplus · Accepted Answer

Marginal product of labor (MPL) is the additional output generated by adding one more unit of labor, while holding all other inputs constant. To calculate MPL, we need to find the difference in total output generated by adding the fifth employee and the third employee, and divide it by the increase in labor (2 employees in this case).
Total output with 3 employees = 3 x 4 = 12 cars per hour
Total output with 5 employees = 5 x 3 = 15 cars per hour
MPL = (15 - 12) / (5 - 3) = 1.5 cars per person in each hour. 
Therefore, the answer is B, MPL = 1.5 cars.

You Operate a Car Detailing Business with a Fixed Amount