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a. You are an employer seeking to fill a vacant position on an assembly line. Are...

a. You are an employer seeking to fill a vacant position on an assembly line. Are you more concerned with the average product of labor or the marginal product of labor for the last person hired? Why? If you observe that the marginal product is declining, how should you decide when to stop hiring workers?

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Answer #1

Answer - The hiring of the labor should depend upon the marginal product and not the marginal product. This is because , MP helps to correctly access the effect of the addition of the labor upon the output produced by the firm whereas in average product , all inputs are included , not only additional.

The employer should continue to hire until the level where TP reaches the maximum , and MP becomes Zero. After this level , hiring should not be continued because MP becomes negative after this , and total product starts falling. Hence the hiring should only be done till level where TP is maximum and MP is Zero.

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