If MP of labor is rising, then AV must be rising too. Is this True or False?
do some research, then take a shot. Hint: your text probably has a graph with both marginal and average (cost or production) curves. Is there a level where the M curve is rising while the AV curve is falling?
To determine whether the statement "If MP of labor is rising, then AV must be rising too" is true or false, let's first understand the concepts involved.
MP, or Marginal Product, refers to the additional output that is produced by adding one more unit of input (in this case, labor). AV, or Average Value, represents the average output per unit of input.
To analyze the relationship between MP and AV, we can refer to the production curve typically depicted in a graph. In this graph, the MP curve shows the additional output gained from each additional unit of input, whereas the AV curve demonstrates the average output per unit of input.
Now, there are situations where the MP of labor is rising while the AV is falling. This occurs when the MP starts to decline, or the additional output gained from each additional unit of input decreases, while the AV is still decreasing but at a slower rate. In this case, the AV curve may exhibit a downward trend, indicating that the average output per unit of input is decreasing, even though the MP is still increasing, albeit at a diminishing rate.
Therefore, the statement "If MP of labor is rising, then AV must be rising too" is FALSE. There can be instances where the MP of labor is rising while the AV is falling. It is crucial to refer to the specific graph or data to determine the relationship between MP and AV accurately.