Unit VII Final Project

Business Studies and Laws of Diminishing Returns

Charles Bunn

Unit IV Assignment

Part 3

Calculations in the Table

The first table consists of the number of workers per day, concession items produced per day, average product, marginal product, total

value product, total value product, and marginal value product while the second has all this except the concession items produced which is

replaced by the number of movies. The calculations in the table only involved finding an average product, marginal product, total value product,

average value product, and marginal value product. To begin with, all calculations in the table were rounded off to the nearest whole number

values where decimals were found. Average product refers to the number of items produced over the number of employees. In the table, the

average product was found by dividing the concession items produced per day by the number of workers. For instance, in the second column, the

concession items were 100 while workers were two making the average product 50. Marginal product refers to the change in quantity over the

change in labor input (Murphet and Murphet, 2019). In the table, the marginal product was found by dividing the change number of concession

items by the number of employees. Total value product is found by multiplying the number of the average product by the concession items

produced per day. On the other hand, the average value product was derived from the total average product divided by the number of employees.

For instance, if the total average product was 5000 and the number of workers was two, the average value product is 2500. Lastly, marginal

value product was found from the product of marginal value by the number of concession items that were being produced.

Employees at law of Diminishing Returns

The law of diminishing returns establishes that if a factor of production is increased, there is an increase in production. However, there is

an optimal point where a continued increase in factors of production results in a decrease in production (‘Law of Diminishing Returns,’ 2019).

Among the factors of production is labor. For the Ruby Red Movie Theater, the number of labor is continuously added and results to increase

leading to a continuous increase in the marginal product until the employees are ten. However, further, an increase to twelve results in a decrease

in the marginal costs. Therefore, the law of diminishing returns begins when the number of employees is increased to twelve. For movie sales

production, the law of diminishing returns begins at eight workers. An increase in the number of workers was followed by an increase in the total

value product. However, when the number went beyond eight, the sales started decreasing again.

Average Product and Marginal Product Curves

The average product curve and marginal product curve have similar shapes. As the number of employees is gradually raised, the average

product and marginal product increases. However, when the labor is continuously increased beyond ten employees, the average product and

marginal product decreases. The law of diminishing returns applies equally for the average product and marginal product. Further, the curves are

similar to average value product and marginal value product (‘law of Diminishing Returns,’ 2019). For the average value and marginal value

curve, an increase in the number of employees causes an increase in the values. However, just like the product and marginal product curves,

continued increase in labor leads to a decrease in the average value product and marginal value product.

Optimal Number Workers/Day to Use

The marginal product values are vital to determining the number of employees the Ruby Red Movie Theater can use. In the particular

case, the number of employees to be used per day is eight whilst the number of movie items to be produced is 1789. The number of optimal

employees is determined based on the marginal product which is calculated as described above. In the table, beyond eight employees, the

marginal product reduces meaning that the extra number of employees does not contribute to increasing production. Regarding the number of

employees with the movie tickets sold, the maximum number of employees needed is six, and the movie sold to be at. Production beyond that

leads to a decrease in sales.

Conclusively, the law of diminishing returns could be used to make uncountable business decisions. For instance, it can help to identify

the number of employees that need to be hired to ensure the company remains productive at low costs.

References

The law of diminishing returns. (2019). Todd Solondz, 1-138. https://doi.org/10.5406/j.ctvnwbxdp.4

Murphet, J., & Murphet, J. (2019). The law of diminishing returns. Todd Solondz, 1-

137. https://doi.org/10.5622/illinois/9780252042768.003.0001

https://doi.org/10.5622/illinois/9780252042768.003.0001

https://doi.org/10.5406/j.ctvnwbxdp.4

Appendices

Number of
Workers per

Day

Concession
Items

Produced
per Day

Average
Product

Marginal
Product

Average Price
of

Concession
Items

Total
Value

Product

Average
Value

Product

Marginal
Value

Product

Price of
Worker
per Day

0 0 0 0 $8.00 0 0 0 $120.00

2 100 50 100 $8.00 5000 2500 10000 $120.00

4 400 100 200 $8.00 40000 10000 80000 $120.00

6 750 125 350 $8.00 106250 17708 262500 $120.00

8 900 112 150 $8.00 100800 12600 135000 $120.00

10 1,025 102 125 $8.00 104550 10455 128125 $120.00

12 1,125 93 100 $8.00 104625 8718 112500 $120.00

14 1,200 85 75 $8.00 102000 7285 90000 $120.00

16 1,250 78 50 $8.00 97500 6093 62500 $120.00

18 1,280 70 30 $8.00 38400 70 38400 $120.00

20 1,290 64 10 $8.00 82560 64 12900 $120.00

James Yoo
Check computation errors for marginal cost column

James Yoo
150

James Yoo
50

22 1,290 58 0 $8.00 74820 58 0 $120.00

24 1,280 53 10 $8.00 67840 53 _12800 $120.00

Questions: Use these questions to help you formulate your ideas for writing the Unit IV Essay.

Using the information from the table you completed, answer the following questions:

1. At what number of workers used per day does the law of diminishing marginal returns begin? How did you determine this number?

At 12 workers. The incremental pattern is changed as marginal returns decreases.

2. At what number of workers used per day does negative marginal returns begin? How did you determine this number?

James Yoo
Check the errors

James Yoo
6

At 12 workers. Marginal product = Change in items produced divided by one. At 12 workers the
marginal product is 100 which is a decrease from 125 at 10 workers

3. What similarities do you see between the shape of the Average Product curve and the Average Value Product Curve?

When the Average Product is rising, the Marginal Product lies above the Average Product.
When the Average Product is declining, the Marginal Product lies below the Average Product.
At the maximum of Average Product, Marginal and Average Product equal each other.

4. What similarities do you see between the Marginal Product curve and the Marginal Value Product curve?

Their pattern of increase and decrease is the same.

5. What is the optimal number of workers per day to use at the theater’s concession stand to produce concession stand item sales? How

did you determine this optimal number?

Eight workers. Determined using the Total value product. Beyond eight, the values start to decrease.

Number of
Workers per

Day

Movie
Tickets

Produced
per Day

Average
Product

Marginal
Product

Average
Price of
Movie
Tickets

Total
Value

Product

Average
Value

Product

Marginal
Value

Product

Price of
Worker
per Day

0 0 0 0 $10.00 0 0 0 $120.00

1 227 227 227 $10.00 2270 51529 227 $120.00

2 615 307.5 615 $10.00 3075 94556.25 1230 $120.00

3 935 311.67 935 $10.00 3116.7 97130.92 2805 $120.00

4 1,185 296.5 1185 $10.00 2965 87838.13 4740 $120.00

5 1,427 285.4 1427 $10.00 2854 81453.16 7135 $120.00

6 1,631 271.83 1631 $10.00 2718.3 73892.46 9786 $120.00

7 1,788 255.43 1788 $10.00 2554.3 65244.12 12516 $120.00

8 1,800 225 1800 $10.00 2250 50625 14400 $120.00

9 1,800 200 1800 $10.00 2000 40000 16200 $120.00

10 1,789 178.9 1789 $10.00 1789 32005.21 17890 $120.00

11 1,757 159.73 1757 $10.00 1597.3 25513.24 19327 $120.00

12 1,679 139.92 1679 $10.00 1399.2 19577.14 20148 $120.00

Running Head: BUSINESS STUDIES 12

Questions: Use these questions to help you formulate your ideas for writing the Unit IV Essay.

Using the information from the table you completed, answer the following questions:

1. At what number of workers used per day does the law of diminishing marginal returns

begin? How did you determine this number?

At ten works. The marginal product starts reducing from ten employees

2. At what number of workers used per day do negative marginal returns begin? How did

you determine this number?

At 7 workers. Beyond seven workers the marginal product reduces

3. What is the optimal number of workers per day to produce movie ticket sales? How did

you determine this optimal level?

Three workers. By looking at the total product cost, beyond three employees it starts
decreasing