2. Suppose that the average product of labor increases as more workers are hired. Which of the following must be true?
a. Marginal product is greater than average product.
b. Marginal product is increasing.
c. Marginal product is decreasing.
d. Marginal product is less than average product.
e. The firm is experiencing increasing returns.
f. Both b and e.
i meant microecon not statistics
If I understand the definitions correctly,
I like a and b
To determine which of the options must be true when the average product of labor increases as more workers are hired, we need to understand the relationship between average product and marginal product.
Average product of labor (APL) is the total product divided by the number of workers. It represents the average output per worker.
Marginal product of labor (MPL) is the change in output that results from hiring one additional worker. It represents the productivity of the last worker hired.
Now, since the average product of labor is increasing as more workers are hired, it implies that each additional worker is bringing more output, which means the marginal product of labor is also positive.
Let's analyze the given options:
a. Marginal product is greater than average product.
This is not necessarily true. While the average product is increasing, the marginal product doesn't have to be greater or less than the average product.
b. Marginal product is increasing.
This is not guaranteed. While the average product is increasing, the marginal product may increase, decrease, or remain constant.
c. Marginal product is decreasing.
This is not necessarily true. The average product can increase even if the marginal product is decreasing, as long as the marginal product remains positive.
d. Marginal product is less than average product.
This is not necessarily true. The average product can increase even if the marginal product is greater than the average product.
e. The firm is experiencing increasing returns.
This must be true. Increasing returns occur when adding more inputs (in this case, workers) leads to a proportionally larger increase in output. Since the average product of labor is increasing, it indicates that the additional workers are contributing more to the overall production, resulting in increasing returns.
f. Both b and e.
This is not necessarily true. While the firm could be experiencing increasing returns (e), the marginal product may increase, decrease, or remain constant (b).
Therefore, the only option that must be true when the average product of labor increases as more workers are hired is e. The firm is experiencing increasing returns.