If the Average Productivity of Labor Equals the Marginal Productivity

question 32

Multiple Choice

If the average productivity of labor equals the marginal productivity of labor,then

• A) the average productivity of labor is at a maximum.
• B) the marginal productivity of labor is at a maximum.
• C) Both A and B above.
• D) Neither A nor B above.

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Definitions:

Average Variable Cost

The total variable costs (costs that change with the level of output) of a firm divided by the quantity of output produced.

Total Variable Costs

The sum of all costs that vary with the level of output, including costs for raw materials, labor, and other expenses that change with production volume.

Purely Competitive

A purely competitive market is characterized by many buyers and sellers, homogeneous products, and no barriers to entry or exit, leading to price taking behavior by firms.

Economic Profit

The difference between a firm's total revenues and its total costs, including both explicit and implicit costs, as opposed to accounting profit which only subtracts explicit costs.