Question

7. If marginal product of labor is increasing as more labor is hired, that implies average product o labor is_(Only circle the correct answer) a) Increasing. b) Decreasing c) Maximurm d) Any of the above. e) None of above Only 8. If marginal cost is increasing as more quantity is produced, average cost is circle the correct answer) a) Increasing. b) Decreasing c) Minimum d) Any of the above. e) None of above

Answer 1

7. If marginal product of labor is increasing as more labor is hired , that implies average product of labor is also increasing because when MP is rising then, AP is also rising but AP is below the MP . And AP continues to rise until MP cuts the AP at its maximum point. Hence, option(A) is correct.

8. If marginal cost is increasing as more quantity is produced , average cost is increasing, decreasing or at minimum . Because MC achieve its minimum earlier than AC . And when MC starts rising , then AC is decreasing but after a point MC cuts AC at minimum point (then also MC is rising). After that AC starts rising, then also MC is rising. Hence, Option(D) is correct.

nL