Question

suppose that the average output per worker is 23.7 units. if a new worker produces 19 units:

a) is the marginal product of labor higher or lower than the average product?

b) will the average output per worker (average product) rise or fall when you higher a new worker?

Answer 1

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Average product is the total product per worker = TP/Q

The marginal product is the change in the total product when input (Labor) changes by 1 unit. Marginal Product = Change in Output/ Change in Input

AP = 23.7 units

Adding one more unit of worker produces 19 units, so marginal product is 19 units.

a) The marginal product (19) is lower than the Average product (23.7)

b) When marginal product is less than AP then Average product is falling, as the additional labor adds less to the total product

There exists an interesting relationship between Average Product and Marginal Product. We can summarize it as under:

• When Average Product is rising, Marginal Product lies above Average Product.
• When Average Product is declining, Marginal Product lies below Average Product.
• At the maximum of Average Product, Marginal and Average Product equal each other.