FIGURE 7- 1
-Refer to Figure 7- 1. The marginal product of labour curve intersects the average product of labour curve when
A) diminishing returns sets in.
B) total product is at its maximum.
C) the firm achieves increasing returns.
D) the firm is at its capacity.
E) average product is at its maximum.

Question

FIGURE 7- 1
-Refer to Figure 7- 1. The marginal product of labour curve intersects the average product of labour curve when
A) diminishing returns sets in. 
B) total product is at its maximum. 
C) the firm achieves increasing returns. 
D) the firm is at its capacity. 
E) average product is at its maximum.

Quizplus · Accepted Answer

The point where the marginal product of labour curve intersects the average product of labour curve represents the maximum average product of labour, i.e. the point at which the firm is using its resources most efficiently. At this point, the average product curve is at its maximum, indicating that each unit of labour is contributing the most it can to output, and the marginal product curve is declining, indicating that each additional unit of labour contributes less to output than the previous unit. Therefore, the best choice is E, where the average product is at its maximum.

FIGURE 7- 1 -Refer to Figure 7- 1. the Marginal Product of Labour