Graph 18-1 This graph represents the value of marginal product for a firm that sells its product in a competitive market.Use the graph to answer the following question(s).
-Refer to Graph 18-1.If a firm was operating at a level of output above Q*, decreasing the amount of labour would do which of the following?
(i) raise profit
(ii) possibly lower revenue
(iii) increase the marginal product of labour

Question

Graph 18-1  This graph represents the value of marginal product for a firm that sells its product in a competitive market.Use the graph to answer the following question(s).
-Refer to Graph 18-1.If a firm was operating at a level of output above Q*, decreasing the amount of labour would do which of the following?
(i) raise profit
(ii) possibly lower revenue
(iii) increase the marginal product of labour

Quizplus · Accepted Answer

Operating above the optimal level of output (Q*) suggests diminishing returns from additional labor, meaning each additional unit of labor adds less output than the previous one. Reducing labor from this point would (i) raise profit by cutting costs and avoiding diminishing returns, (ii) possibly lower revenue if the reduction in output decreases total sales, and (iii) increase the marginal product of labor because the remaining labor is used more efficiently, reversing the diminishing returns effect.

Graph 18-1 This Graph Represents the Value of Marginal