Consider a basket- producing firm with fixed capital.If the firm can produce 36 baskets per day with 3 workers and then increases productivity to 44 baskets per day with 4 workers,then which of the following statements is true?
A)The marginal product of the fourth worker is 11.
B)The firm has passed the point of diminishing average productivity.
C)With 4 workers,the firm's average product of labour is 13.
D)The firm has not yet reached the point of diminishing marginal productivity.
E)The marginal product is above the average product.

Question

Quizplus · Accepted Answer

The statement "the firm has passed the point of diminishing average productivity" is true because the average product of labor has increased from 12 (36/3) to 11 (44/4), indicating that adding the fourth worker has not increased productivity enough to offset the additional cost of labor. However, none of the other statements can be inferred from the information given.

Consider a Basket- Producing Firm with Fixed Capital