Consider the following statements when answering this question: I. Suppose a semiconductor chip factory uses a technology where the average product of labor is constant for all employment levels. This technology obeys the law of diminishing returns.
II) Suppose a semiconductor chip factory uses a technology where the marginal product of labor rises, then is constant and finally falls as employment increases. This technology obeys the law of diminishing returns.
A) I is true, and II is false.
B) I is false, and II is true.
C) Both I and II are true.
D) Both I and II are false.

Question

Quizplus · Accepted Answer

The first statement is false because if the average product of labor is constant, then there is no decreasing marginal returns. The second statement is true because the technology described follows the law of diminishing returns with an increasing, then constant and finally decreasing marginal product of labor.

Consider the Following Statements When Answering This Question: I