At a Given Level of Labor Employment, Knowing the Difference

question 27

Multiple Choice

At a given level of labor employment, knowing the difference between the average product of labor and the marginal product of labor tells you:

• A) whether increasing labor use raises output.
• B) whether increasing labor use changes the marginal product of labor.
• C) whether economies of scale exist.
• D) whether the law of diminishing returns applies.
• E) how increasing labor use alters the average product of labor.

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Definitions:

Labor

Human effort, either physical or mental, used in the production of goods and services.

Average Product

The output per unit of input, calculated by dividing the total output by the number of units of the input.

Lawns Mowed

The activity of cutting the grass of a lawn to maintain its appearance and health.

Marginal Products

Marginal Product is the extra output, or product, produced by using one more unit of a production input, holding all other inputs constant.