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
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
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?
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