Question

Nazli’s Kitchen makes doner kebabs (a traditional Turkish dish) and has a total cost function given by TC=50+3Q^2, where Q is the quantity of doner kebabs. Does Nazli’s Kitchen’s experience diminishing marginal product of labor? How do you know?

Answer 1

If there is a diminishing marginal product, implying that there are diminishing returns in the short run, there must be increasing costs, in which the marginal cost must be rising.

In this case marginal cost is the derivative of total cost and it is given by dTC/dQ = 6Q. As the production is increased to the marginal cost increases. this implies that when one more unit of labour will be employed the marginal product will decline. Hence we can say that there is diminishing marginal product of labour