Diminishing Returns and Labor

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40) Consider the following statements when answering this question; I.Whenever the marginal product of labor curve is a downward sloping curve, the average product of labor curve is also a downward sloping curve that lies above the marginal product of labor curve. II.If a firm uses only labor to produce, and the production function is given by a straight line, then the marginal product of labor always equals the average product of labor as labor employment expands. A) I is true, and II is false.

B) I is false, and II is true.
C) Both I and II are true.
D) Both I and II are false.
Answer: B
Diff: 3
Section: 6.2

41) You operate a car detailing business with a fixed amount of machinery (capital), but you have recently altered the number of workers that you employ per hour. Three employees can generate an average product of 4 cars per person in each hour, and five employees can generate an average product of 3 cars per person in each hour. What is the marginal product of labor as you increase the labor from three to five employees? A) MP = 3 cars

B) MP = 1.5 cars
C) MP = 15 cars
D) MP = -1 cars
Answer: B
Diff: 3
Section: 6.2
42) You operate a car detailing business with a fixed amount of machinery (capital), but you have recently altered the number of workers that you employ per hour. As you increased the number of employees hired per hour from three to five, your total output increased by 5 cars to 15 cars per hour. What is the average product of labor at the new levels of labor? A) AP = 3 cars per worker

B) AP = 5 cars per worker
C) AP = 4 cars per worker
D) We do not have enough information to answer this question. Answer: A
Diff: 1
Section: 6.2

43) An important factor that contributes to labor productivity growth is: A) growth in the capital stock.
B) technological change.
C) the standard of living.
D) A and B only
E) A, B, and C are correct.
Answer: D
Diff: 1
Section: 6.2

44) Joe owns a coffee house and...
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