Homework Answers
1. The first statement is false as APL( average product of labor ) reaches its maximum at the end of first stage and not at the end of third stage.
2. The statement is true as when MPL < 0, its means that now as firm hires more workers, the output starts decreasing in the third stage.
3. The statement is false as in the third stage, the firm cannot increase its output and profit by hiring more workers.
4. The statement is true as in the third stage, by reducing the number of workers, firm can increase its output and profit.
5. The statement is true as in the third stage, the firm has already hired too many workers relative to fixed inputs so now its completely inefficient to hire more workers.
6. The statement is false, as the firm's profit maximisation point lies at the end of second stage and not in third stage.
7. The statement is false as in the third stage, fixed inputs are overutilized due to hiring of too many workers.
8. The statement is false as in the third stage, fixed inputs are being overutilized which is land and capital are overutilized relative to labor so there exists no good balance between fixed inputs and variable inputs.
9. The statement is false as during the third stage, total output experiences negative marginal returns and not diminishing marginal returns.
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