Question

Suppose that the marginal product of labor falls from 21 units of output to 0 as the amount of labor employed increases by 1. Which of the following is TRUE?
a. The coefficient of price elasticity of demand is 1.
b. Total revenue is at a minimum, and the additional worker should be laid off.
c. Total product cannot be increased further with additional workers.
d. The marginal revenue product is at a maximum

Answer 1

Answer:

. Total product cannot be increased further with additional workers.

Explanation:

If the marginal product of labour falls to zero when one more unit of labour is added, it indicates that increasing the amount of labour would not increase total product.

This can be explained by the law of diminishing returns which says as more units of a variable input is added to a fixed income of production, output might increase at a point but after some time total output would increase at a decreasing rate and marginal product would be decreasing.

Imagine a farmer who hires 1 unit of labour to work his farm. he notices that one unit isn't enough to work the farm,so he increases the unit of labour to 5. due, to this the amount of work done by labour increases. imagine the farmer continues to increase the the amount of labour on the farm. at a point the farm would be overcrowded. there might not be machinery available for the extra units of labour to work with. as a result of this, labour would not do any work. labour would just resume on the farm and lounge through the day. thus this extra units of labour isn't producing anything. his marginal product is zero. imagine the farmer hires one more unit of labour. this new labour would not add anything to total output because the farm is over saturated with labour.