Figure 18-5
-Refer to Figure 18-5.If the marginal product of labor falls and the price of apples remains unchanged,

Question

Figure 18-5 
-Refer to Figure 18-5.If the marginal product of labor falls and the price of apples remains unchanged,

Quizplus · Accepted Answer

If the marginal product of labor falls, it means that each additional unit of labor is adding less to the total output. This implies that the total output is increasing at a decreasing rate. As a result, the total cost of production will increase at a faster pace than the increase in the total output. This will lead to a higher average cost of production.

Since the price of apples remains unchanged, the firm will not be able to pass on the higher cost of production to the consumers by increasing the price of apples. This means that the firm will earn a lower profit margin on each unit of output.

Hence, the correct choices are (i) and (iii):

(i) The average cost of production will increase
(iii) The profit margin per unit of output will decrease.

Figure 18-5 -Refer to Figure 18-5.If the Marginal Product of Labor Falls