📚 Learning Guide
Short-Run Production Decisions
easy

In the short run, as a firm increases the number of workers while keeping capital fixed, what is likely to happen to the average product of labor?

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Learning Path
Learning Path

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Choose the Best Answer

A

It will always increase

B

It will eventually decrease after a certain point

C

It will remain constant

D

It will fluctuate randomly

Understanding the Answer

Let's break down why this is correct

Answer

In the short run, when a firm adds more workers while keeping its equipment or machinery the same, the average product of labor can change. Initially, as more workers join, they can help each other and make better use of the fixed capital, leading to an increase in the average product of labor. However, after a certain point, adding too many workers can lead to overcrowding, where there isn't enough equipment for everyone to use efficiently. This can cause the average product of labor to decrease, as workers might get in each other’s way or have to share resources. For example, if a bakery hires too many bakers but only has one oven, the extra bakers may not be able to bake as much bread, reducing the overall output per worker.

Detailed Explanation

When a firm hires more workers but has the same amount of machines or tools, each worker may not be as productive. Other options are incorrect because Some might think that more workers always means more output; It's a common mistake to believe that productivity stays the same.

Key Concepts

Average product
Topic

Short-Run Production Decisions

Difficulty

easy level question

Cognitive Level

understand

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