1. A West Virginia Coal Mining Company uses machinery (capital) and workers to mine coal. Various engine sizes for the equipment are available to the company. The data in the table below show the amount of coal produced (in tons) using a specified horsepower of the engine (capital) when different crew sizes are used.

Equipment Engine horsepower

250 500 750 1000

Labor

1 1* 3 6 10

2 2 2 6 16

3 4 16 29 44

4 6 29 44 55

*numbers inside the table correspond to tons of output produced for a given combination of capital and labor.

a) Calculate the marginal product and average product of labor for the different crew sizes shown when engine horsepower is 750.

List your answers in a table which has units of labor as the first column, marginal product of labor in the second, and average product of labor in the third.

b) Because of the union contract, the number of workers must be exactly three. The company is free, however, to use whatever engine size it chooses. If this is so, calculate the marginal product and average product of equipment for the different horsepower shown when labor units remain at three.

List your answers in a new table which has units of capital as the first column, marginal product of capital in the second, and average product of capital in the third.