Question

Assume the marginal product of labor first rises, reaches a maximum, and then falls. If the average product of labor is falling, which of the following is true?


The marginal product of labor is greater than the average product of labor.

Option A,The marginal product of labor is greater than the average product of labor.

a

The level of output produced must be at its maximum.

Option B,The level of output produced must be at its maximum.

b

The marginal product of labor must be falling.

Option C,The marginal product of labor must be falling.

c

The marginal product of labor must be negative.

Option D,The marginal product of labor must be negative.

d

The average product of labor has not yet reached its maximum.

Answer 1

None of A–D. If average product is falling then marginal product is less than average product.

Reason: d(AP)/dL = (MP − AP)/L, so AP falling means MP − AP < 0 ⇒ MP < AP. This does not require MP to be negative or to be falling, nor does it imply output is at a maximum.