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Micro question help!!

Hi guys, doing some revision but got totally stumped on this question,

Tom Smith owns a fishing business. He rents a fishing net from his friend
John, and self-employs to get some fish. In particular, his production function
can be described as “If Smith works L hours per day, then he is able to produce
0.3L kilograms of fish, as long as L is up to 15. Smith may work more than 15
hours, but due to darkness and mist he cannot increase his catch any more. “
a. How does the marginal product of labour change as the number of hours
increases? Is the law of diminishing marginal returns to labour satisfied?

I haven't done eco in a while, hence the need to brush up on it, mpl=change in q/change in l. So when I put the info in a table with no. of hours, output and mpl, I got the mpl as 0.3 for every one up to 15 (didn't go past 15) I'm guessing this is wrong, because the law of diminishing marginal returns isnt satisfied, his output just keeps on going up. :s-smilie:

soo confused, helpp! I would have looked into the back of the book for an explanation but mines doesn't have answers let alone answer and an explanation booo :frown:

Part b was:
Now suppose that Smith is able to expand his business – he can have more
than one fishing net. The remaining part of his full production function is: “With
two fishing nets, Smith can produce 0.5L kilograms of fish per day (if he works
L hours), with three he can produce 0.6L kilos of fish (still working beyond 15
hours a day is unproductive). With more than three fishing nets Smith is not
able to increase his product, that is, he still produces 0.6L kilos of fish”.
b. Suppose that L = 3 hours. What is the marginal product of the first, second,
third, fourth, etc fishing net? Is the law of diminishing marginal returns to
fishing nets satisfied?
But i think id be able to do that if I was going right on a! any help would be much appreciated! :smile:

Reply 1

xKayze

Hmm, I have never done an Economics question like this. (Northern Ireland uses a different examination board).

Although judging by the question...there doesn't seem to be diminishing returns on his efforts, until the 15 hour mark, where suddenly his returns for labour = 0 fish per hour.

Where L = 1 : Catch = 0.3Kg
Where L = 2 : Catch = 0.6Kg

It would seem that the marginal return remains constant throughout his day at work, which wouldn't work in practice, however as the question is purely theoretical and simplified, I guess it can work fine.

For Part B, there is diminishing returns, depending on how many nets you use, but not how long you use the same net size for, just as in part A.

As I said at the start, we never did questions like the for A-level, so I am not really sure how to answer it, I can only interpret the data as best as I can.