Production Problem Set
Department of Economics
1. SmartTough is a commercial bakery selling cookies over the
internet. The following table provides someinformation about cookie
production at the bakery. Fill in the table below.
2. After what unit of labor do diminishing marginal
returns set in?
3. When a firm is experiencing diminishing marginal returns,
average product must be declining.
4. The main reason SmartTough.com experiences diminishing
returns is that as it increases its hiring it is forced to hire less
The Pitcairn Islands produce peaches and plums using only
labor. The annual labor supply is 10 person-years. The
production schedules for the two goods are shown below.
5. Peach production exhibits diminishing marginal returns.
6. Plum production exhibits diminishing marginal returns.
7. At what level of peach production are average and
marginal product equal?
8. At what level of plum production are average and marginal
9. If the islanders have chosen to produce 120 peaches, how
many plums can they produce?
10. When producing 90 peaches, what is the opportunity cost
of producing 30 more peaches?
Papyrus Products Corporation produces fiberboard using
sawdust and hydraulic presses. PPC's daily production (measured in
tons) is illustrated in the table below. Output varies with different
combinations of the quantity of sawdust and machines.
11. In 2009 Papyrus owned one machine. On March
23 of that year they processed one ton of sawdust. How much fiberboard
did they make?
12. On March 23, 2009 what was the marginal product of an
additional ton of sawdust?
13. On March 23, 2009 Papyrus acquired a second press.
If they processed two tons of sawdust, what was the marginal product of the
14. Papyrus' production process exhibits diminishing
marginal returns to sawdust. True
15. Papyrus' production process exhibit constant returns to
Neptune Long Line Fishing Company uses hooks (H), lines (L)
and sinkers (S) to catch anchovies (Q). Its daily production function is Q =
100H + 40L + 10 S.
16. On May 9, 2008 it used 8 hooks, 4 lines and 4 sinkers.
How many anchovies did it catch?
17. What is the marginal product of an additional hook?
18. What is the marginal product of an additional sinker?
19. Does Neptune's production function exhibit
increasing returns to scale?