In: Economics
Staci's Sign Shoppe makes signs for businesses. Staci is currently producing 210 signs per week with three employees. Staci hires an additional worker and total output per week rises to 292 signs. At four workers, marginal product is _____ the average product; thus, average product is _____.
below; rising
equal to; unchanged
above: falling
above; rising
Solution:
Marginal product is the additional output produced by employing an additional worker. So, marginal product of 4th employee = 292 - 210 = 82 signs
Average product = total product/number of employees = 292/4 = 73 signs
As marginal product is above the average product (82 > 73), average product must be rising.
Thus, the correct option is (D) above; rising.