Assume a company is at a point in production where marginal product is below average product.Which of the following must be true?

Question

Quizplus · Accepted Answer

If marginal product is below average product, then it suggests that the additional output produced by each additional unit of input is less than the average output per unit of input. This implies that the marginal product is falling, and this is due to the operation of the law of diminishing marginal returns. As more units of input are added to a fixed level of other inputs, the marginal product of the additional units will eventually decline. This decrease in marginal product will pull down the average product as well, since average product is the total output produced by all units of input divided by the number of units of input. Therefore, all three statements are true in this scenario.

Assume a Company Is at a Point in Production Where