Assume that we have a production process that exhibits increasing and then decreasing marginal productivity. That is,
Question:
Assume that we have a production process that exhibits increasing and then decreasing marginal productivity. That is, as we increase output, the marginal product of labor starts at some level above zero, rises to a maximum, and then eventually falls to zero. Which of the following statements is true? Briefly explain.
a. Total product reaches its highest level where marginal product is equal to average product.
b. Marginal product and average product are equal when marginal product is at its maximum.
c. When marginal product is equal to zero, average product is rising.
d. When marginal product is above average product, average product is rising.
e. When marginal product is equal to average product, output is maximized.
Step by Step Answer:
The correct statement is b Marginal product and average product are equal when marginal product is at its maximum This statement is true because when the marginal product of labor is at its maximum it is equal to the average product of labor This occurs at the point where the total product curve reaches its peak and starts to decline At this point the additional output produced by each additional unit of input marginal product is equal to the average output per unit of input average product The other statements are not necessarily true in a production process with increasing and then decreasing marginal productivity Total product reaches its highest level where marginal product is equal to average product is a ...View the full answer
Mylab Economics With Pearson Access Code For Principles Of Microeconomics
ISBN: 9780135197141,9780135197103
13th Edition
Authors: Karl E. Case; Ray C. Fair; Sharon E. Oster
