Chapter 10R, Problem 18MCQ

To determine

The correct option for given situation where average product of labor is rising if more workers are hired.

Answer to Problem 18MCQ

Option c is correct.

Explanation of Solution

Explanation for correct option:

c.

When marginal product is higher than average product of labor then in such case average product will be rising whereas average product is declining then marginal product will be lower than the average product. Therefore, option c is correct.

Explanation for incorrect options:

a.

If marginal product is rising with respect to the average product then only average product will be rising. Therefore, option a is incorrect.

b.

If average product is rising then marginal product cannot be definitely falling without comparative analysis between AP and MP. Therefore, option b is incorrect.

d.

It is uncertain to say that the average total cost will be rising as there is no information about cost increase or decrease is provided. Therefore, option d is incorrect.

e.

Since there is no information about average cost is given, it cannot be sad that marginal cost will be falling. Therefore, option e is incorrect.

Economics Concept Introduction

Marginal cost: Marginal cost refers to the cost of production which is incurred by the firm if one additional unit is produced. In other words, marginal cost is the cost incurred by the firm for producing an additional unit.