15 **Question:**Red Stone Creamery currently hires 5 workers. When it added a 6th worker, its output actually fell. Which of the following statements is true?- O The sixth worker is not as skilled as the fifth worker.- O The marginal product of the sixth worker must be negative.- O The total product becomes negative.- O The average product of the sixth worker is negative. **Explanation:**This question addresses the concept of marginal productivity in economics. When hiring additional labor results in a decrease in total output, it indicates that the marginal product of the new worker is negative. This typically occurs when an additional worker reduces overall efficiency due to factors like overcrowding or limited resources. Understanding these dynamics helps firms optimize their workforce and resources.

Marginal product(MP) is the change in output due to an additional increase in the amount of input used in the production of a commodity. Average product(AP) is the output generated per unit of input. The total product(TP) is the total amount output produced by a firm using the inputs at a given period of time. The total product curve is an inverted U-shaped curve as the TP increases and reaches a maximum point and then decreases due to diminishing marginal returns.The firm hires 5 workers and adding one additional unit of labor led to a decrease in the output. This means that the marginal product of labor negative. When adding one additional unit of input decreases the total output, then marginal product of that input is said to be negative. Marginal product can be zero or negative. The portion of the total product curve where it is downward sloping, marginal product falls below zero and becomes negative. The total product curve can be zero but cannot be negative. The average product is always positive because total product is always positive. It can be zero but not negative. Average product is maximum when MP equals the AP but decreases when MP is less than AP. Option 1 is not true because it is irrelevant. It is not necessary that the 6th worker is less skilled which is why the output decreased. Option 3 is not true because total product can never be negative and since the output falls due to an additional input , so marginal product is negative and not the total product. Option 4 is not true because average cannot also be zero since TP is always positive, so output per unit of input will not be zero whereas marginal product is negative in this case. Thus, option 2 is true as marginal product is negative due to which an increase in input has reduced the total output.

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Red Stone Creamery currently hires 5 workers. When it added a 6th worker, its output actually fell. Which of the following statements is true? O The sixth worker is not as skilled as the fifth worker. O The marginal product of the sixth worker must be negative. O The total product becomes negative O The average product of the sixth worker is negative.

Red Stone Creamery currently hires 5 workers. When it added a 6th worker, its output actually fell. Which of the following statements is true? O The sixth worker is not as skilled as the fifth worker. O The marginal product of the sixth worker must be negative. O The total product becomes negative O The average product of the sixth worker is negative.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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