Tom and Dick, who own the Tom, Dick, and Hairy Barbershop, need to decide how many barbers to hire.
The production function for their barbershop looks like this:
Calculate the marginal product of hiring additional barbers, and fill in the last column of the table. Over what range is the marginal product of labor increasing? constant? diminishing? Graph the production function. By looking at the graph, you should be able to tell at what point the average productivity of labor is highest. Calculate average productivity at each point to illustrate your answer.