Production

Robinson Crusoe gets shipwrecked on an island.

He has no food, but luckily the island is full of
coconut trees. He can harvest the coconuts using
his labor as the only input according to the
following production function:
Total Physical Product = f(x) = .4x + .09x2 - .003x3
Production
Robinson would like to do some analysis to make sure
he is spending his labor wisely; he wants have enough
coconuts to survive while still having time to relax on
the beach. He’s terrible at math though, so our AAE
215 class has agreed to help him out.
How Many Coconuts?
1. Graph the Total Physical Product if Robinson uses 5, 10, 15, 20, and
25 units of his labor. Do the same for Average Physical Product.
Remember TPP=f(x)=.4x+.09x2-.003x3
2. Using Calculus (if you can), find the equation for Marginal Physical
Product (Hint: Take the derivative of the production function with
respect to x). Graph the MPP curve at 5, 10, 15, 20, and 25 units of
labor on the same graph as the Average Physical Product Curve. If
you do not remember calculus,
Output do the above using MPP=
3. What are the maximum valuesInput of TPP, APP, and MPP? At what

levels of labor use are the maximum values reached?

4. Look at the graph of APP and MPP. Which regions on this graph
represent Stages 1, 2, and 3 of production? Why?
1. TPP/APP Total Physical Product (TPP)
25

20

Coconuts (Output)
15

10

5
Input TPP APP
0
0 0 0 5 10 15 20 25

5 3.875 0.775 Labor Use (Input)

10 10 1 Average Physical Product (APP)

1.2
15 16.125 1.075
1
20 20 1

Coconuts (Output)
0.8
25 19.375 0.775
0.6

0.4

0.2

0
5 10 15 20 25

Labor Use (Input)

2. MPP Using Calculus,
MPP=.4+.18x-.009x2
APP and Discrete MPP
Average Physical Product (APP)
Discrete Discrete Marginal Physical Product (MPP)
Input TPP APP MPP MPP 1.4

0 0 1.2

5 3.875 0.775 1.075 0.775 1

Coconuts (Output)
10 10 1 1.3 1.225 0.8

0.6
15 16.125 1.075 1.075 1.225
0.4
20 20 1 0.4 0.775
0.2
25 19.375 0.775 -0.725 -0.125
0
5 10 15 20 25
-0.2

Labor Use (Input)

3. Max TPP, APP, MPP
Total Physical Product (TPP) APP and Discrete MPP
25 Max Average Physical Product (APP)
TPP=20
Discrete Marginal Physical Product (MPP)
at x=20
1.4 Max Max APP=1.075
20
MPP=1.2 at x=15
1.2 at x=10,
15
1
Coconuts (Output)

15

Coconuts (Output)
0.8

0.6
10
0.4

0.2
5
0
5 10 15 20 25
-0.2
0
Labor Use (Input)
5

15

25
0

10

20

Labor Use (Input)

4. Stages of Production
Stage 1: Average productivity is
Average/Marginal Physical Product
increasing; if it is worth Stage 1 Stage 2 Stage 3 APP MPP
producing at all, it is always worth 1.4
producing MORE. Do not
1.2
produce here.
Stage 2: A decision has to be 1

made. Must balance additional 0.8

input use against the additional

0.6 St St
ag ag
output produced. We would like

St 2
e e

ag
3

e
1
to produce here! 0.4

Stage 3: BAD! If we are producing 0.2

here we are spending inputs to 0

LOSE output. Do not produce
-0.2
here. 5 10 15 20 25 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25