5.2.

2b Production Data Analysis

Procedure: 1. Open Microsoft Excel 2. Using your worksheet from our origami paper cup activity set up a table so that we can calculate the marginal Product and Cost per unit. Your table should resemble the layout of the rows and columns on your worksheet. 3. Put in a function to calculate your marginal product and use that function to auto calculate that column. 4. Put in a function to calculate your cost per unit of marginal product and use that function to auto calculate that column. 5. Create ONE line graph to show the relationship between the number of workers and the following: a. Total Production b. Marginal Product c. Cost Per Unit of Marginal Product Important Information: 1. Marginal Product is the change in output that occurs when a unit of labor is added (employee is hired) 2. Marginal Product can be calculated by subtracting the labor output from round 0 from round one, the output from round 1 from round 2, and so on. As an example say the production occurred as follows in the four rounds: 5, 12, 17, and 20. Note that if there is no labor there is no output. Then the first worker helped add 5 units of output (5 minus 0). The second worker added 7 units of output (12 minus 5), the third worker added 5 units and the fourth worker added 3 units. Diminishing returns set in with the third worker in this example because the marginal product declined from 7 to 5 with the addition of the third worker. Note the reason for this is that with only one pair of scissors only so much can be cut, so additional workers are probably waiting on patterns to be cut. Thus, additional workers cant add as much output as previous workers. 3. Cost Per Unit of Marginal Product takes what each employee (unit of labor) would be payed and compares it to how much output was produced to find out how much it costs to produce one unit of output. For example, say each worker gets paid $7 during the period of production. Since the first worker added 5 units of output, those units cost the company an additional (in addition to the cost of the scissors and the paper) $1.40 per unit of output ($7 divided by 5). The second worker added 7 units of output, or added output at $1 per unit of output ($7 divided by 7). The third worker added output at $1.40 per unit of output and the fourth worker added output at a cost of $2.33 per unit of output added.

Conclusion Questions (Please complete these questions and the letter in Microsoft Word): 1. What factors of production were used to produce the cups? People, time, material, capital, and information were the factors of production used to produce the cups. 2. With the addition of what worker(s) did diminishing returns occur? With the addition of the 3rd and 5th worker diminishing returns occurred. 3. What happens to the cost per unit as diminishing returns set in? When diminishing returns set in, the cost per unit rises. 4. Why is it important for an entrepreneur to understand the concept of diminishing returns? It is important for entrepreneurs to understand diminishing returns so that they can make sure that their companies are making more than they are spending. 5. The scissors that were used to cut out the cup origami pattern would be an example of A. labor B. land C. capital D. entrepreneurship 6. If 1 worker produces a total of 4 units of output, 2 workers produce a total of 10 units of output, 3 workers produce a total of 18 units of output, 4 workers produce a total of 25 units of output, 5 workers produce a total of 30 units of output, and 6 workers produce a total of 28 units of output, with the addition of what worker do diminishing returns first occur? A. worker 6 B. worker 3 C. worker 4 D. worker 5 7. Briefly explain what the entrepreneur could do to improve the productivity of the additional workers hired. Use complete sentences for your answer. In order to improve the productivity of the additional workers hired the entrepreneur should give them different jobs, or split up the work load differently. The entrepreneur could assign jobs that dont depend on one person doing something, so that no one is idle while others are working. Or he/she could redistribute the work so that each person does only a single part and then passes it on, like an assembly line.

8. Write a letter to the owner of the cup factory explaining the concept of diminishing returns and then offer suggestions on how to improve the productivity of the additional workers hired. Students should apply the principles of six-trait writing to their letters. To Whom It May Concern, I have information pertaining to the subject of diminishing returns. I feel as if you would appreciate the information I have to share with you, as it would greatly improve the productiveness of your company. In case you didnt already know diminishing returns is when you add more input, but end up with less output. This can occur when you add more workers to your crew. It may not be the workers fault. It may be the way the work load is separated. Some people may be idle while waiting for others to finish their part. What I recommend is that you reassign the work load. Doing this can make sure that everyone has something to do at all times, instead of waiting for their turn to do something. A good setup would resemble an assembly line, such as in factories where cars are made. You should think about these things next time you reconstruct your company. Sincerely, Alysha