Suppose a chair manufacturer is producing in the short run (with existing plant and equipment). The manufacturer has observed the following levels of production corresponding to different numbers of workers:

NUMBER OF WORKERS NUMBER OF CHAIRS

1 10

2 18

3 24

4 28

5 30

6 20

7 25

a. Calculate the marginal and average product of labor for this production function.

b. Does this production function exhibit diminishing returns to labor? Explain.

c. Explain intuitively what might cause the marginal product of labor to become negative.

2. The marginal product of labor in the production of computer chips is 50 chips per hour. The marginal rate of technical substitution of hours of labor for hours of machine capital is ! " . What is the marginal product of capital?