Consider the following statements when answering this question: I. Whenever the marginal product of labor curve is a downward sloping curve, the average product of labor curve is also a downward sloping curve that lies above the marginal product of labor curve.
II) If a firm uses only labor to produce, and the production function is given by a straight line, then the marginal product of labor always equals the average product of labor as labor employment expands.
A) I is true, and II is false.
B) I is false, and II is true.
C) Both I and II are true.
D) Both I and II are false.

Question

Quizplus · Accepted Answer

I is false because the average product of labor curve can initially be increasing even when the marginal product of labor is decreasing, as long as the marginal product is above the average product. It's only when the marginal product falls below the average product that the average product starts to decline. II is true because if the production function is linear (a straight line), it implies constant returns to the variable input (labor), meaning that the marginal product of labor is constant. Since the marginal product is constant and equals the slope of the production function, and the average product of labor is calculated as total output divided by total labor (which also equals the slope of the line in a linear production function), both the marginal and average products of labor are equal and constant as labor employment expands.

Consider the Following Statements When Answering This Question: I