Consider a firm in the short run. Average product is at its maximum when
A) the maximum quantity of the variable input is employed.
B) diminishing returns cease to operate.
C) average product equals marginal product and marginal product is falling.
D) marginal product is maximized.
E) total product is maximized.

Question

Quizplus · Accepted Answer

When average product equals marginal product and marginal product is falling, it indicates that diminishing returns are starting to operate. At this point, the average product is at its maximum. Therefore, option C is the correct answer.

Consider a Firm in the Short Run