Question

Businesses can raise their average product by investing in new equipment, by reorganizing work to be more efficient, or by

a. eliminating variable costs

b. reducing the marginal product

c. outsourcing labor

d. insourcing profits

Answer 1

Average product is the per unit production of a firm.

Average product of a business = Total product / input of labour.

In order to increase the average product, the firm can increase the total product keeping labour constant or decrease the labor input keeping total product constant.

Here, insourcing profits will help to increase the average product of the business.

Insourcing profits include training of the labor force. If the skills of the labor force is enhanced, the marginal product of labor will rise, that is, the per unit production of labor will rise and thus the business will be able to produce an icreased amount of quantity given the same labor force, as discussed earlier, this will increase the average product of the business.