Question

The production of customers served (Q) at a convenience store is determined by the function Q(L,K) = LK + K, where L is labor and K is checkout stands. Which statement correctly describes the corresponding short-run average product of labor curve, where the number of checkout stands is fixed?

A. APL decreases at a decreasing rate.

B. APL decreases at an increasing rate.

C. APL decreases at a constant rate.

D. APL increases at a decreasing rate.

E. APL increases at an increasing rate.

Answer 1

Option A.

For example, Let us increase L and keep K fixed =50

L	K	Output	APL	Change in APL
0	50	50
10	50	550	55.00	55.00
20	50	1050	52.50	-2.50
30	50	1550	51.67	-0.83
40	50	2050	51.25	-0.42
50	50	2550	51.00	-0.25
60	50	3050	50.83	-0.17
70	50	3550	50.71	-0.12
80	50	4050	50.63	-0.09
90	50	4550	50.56	-0.07
100	50	5050	50.50	-0.06

So, looking at the graph and table, the APL decreases at an decreasing rate