When the total product curve is falling, the:

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Consider the relationship between the total product (TP) curve and its slope. The slope of the TP curve at any quantity of labor is the marginal product of labor (MP). When the TP curve is falling, its slope is negative, which means MP is negative.
Option a: 'marginal product of labour is negative' — This aligns with the basic interpretation: a decreasing TP implies the additional output from adding one more unit of labor is negative, hence MP < 0. This statement is consistent with the situation described.
Option b: 'Average product of labour is increasing' — AP is TP divided by labor input (TP/L). Even if TP is falling, AP could be falling, rising, or staying constant depending on how TP changes relative to L. There is no guarantee that AP is increasing when TP is falling, so this claim is not necessarily true.
Option c: 'marginal product of labour is zero' — MP = 0 would occur at the minimum point of the TP curve, where the slope is zero. A falling TP has a negative slope, so MP cannot be zero in that region. This option misidentifies the slope condition.
Option d: 'Average product of labour must be negative' — AP = TP/L. As long as TP remains positive, AP is positive (since L > 0). TP can be positive while decreasing; in that case AP remains positive. Declaring AP must be negative is incorrect because it relies on TP becoming negative, which is not implied by TP falling alone.
In summary, the key link is that a falling TP implies a negative MP, while the other statements either misinterpret the slope condition or assume negatives where there is none.

Dashboard Term 1 Unit 7 Assessable Quiz - Economics of the Firm (2)

When the total product curve is falling, the:

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Dashboard Term 1 Unit 7 Assessable Quiz - Economics of the Firm (2)

When the total product curve is falling, the:

View Explanation

Log in for full answers

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For a firm hiring labor in a perfectly competitive labor market, the marginal revenue product curve slopes downward after some point because as more of a factor is employed, which of the following declines?

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