ECONOMICS
PROFIT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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fall initially, but eventually rise
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rise initially, but eventually fall
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rise consistently due to diminishing returns
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rise consistently due to the advantages of specialization
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Detailed explanation-1: -What happens to average product as additional units of labor are added to a fixed plant? It increases, reaches a maximum, and then decreases.
Detailed explanation-2: -As more and more labor is used along with a fixed amount of capital, there is less and less capital for each worker to use, and the productivity of additional workers necessarily declines.
Detailed explanation-3: -The marginal product of labor increases because, as the first workers are hired, they may specialize in those tasks in which they have the greatest ability. Eventually, with the quantity of capital fixed, the workplace becomes congested and the productivity of additional workers declines.
Detailed explanation-4: -The additional output produced by a firm as a result of hiring another worker is called the marginal product of labor. The amount by which a firm’s revenue will increase as a result of hiring one more worker is called the marginal revenue product of labor.