Consider a basket-producing firm with fixed capital.If the firm can produce 36 baskets per day with 3 workers and then increases production 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)With 4 workers,the marginal product is above the average product.
C)The firm has not yet reached the point of diminishing marginal productivity.
D)The firm has passed the point of diminishing marginal productivity.
E)With 4 workers,the firm's average product of labour is 8.

Question

Quizplus · Accepted Answer

Diminishing marginal productivity occurs when each additional worker adds less to the total output than the worker before them. The increase in production going from 3 to 4 workers (from 36 to 44 baskets) is only a marginal increase of 8 baskets, meaning that the fourth worker's marginal product is less than the third worker's. This indicates that the firm has passed the point of diminishing marginal productivity.

Consider a Basket-Producing Firm with Fixed Capital