When the marginal product of labour is less than the average product of labour,
A)the average product of labour is increasing.
B)the marginal product of labour is increasing.
C)the total product curve is negatively sloped.
D)the firm is experiencing diminishing marginal returns.
E)None of the above.

Question

Quizplus · Accepted Answer

Diminishing marginal returns occur when the marginal product of labour decreases as more units of labour are added. When the marginal product of labour is less than the average product of labour, it indicates that adding an additional unit of labour is decreasing the overall productivity of the workers, which is a characteristic of diminishing marginal returns. Therefore, the best choice is D.

When the Marginal Product of Labour Is Less Than the Average