The following curve is the total product curve when capital is fixed at K

Economics Dec 06, 2020

The following curve is the total product curve when capital is fixed at K. The upward-sloping straight line starting from the origin is tangent to the total product curve when labor level is equal to L2. From the graph we know that for the corresponding capital level K, Output (K fixed) labor L1 L2 L3 APLMPLat L3 APL=MPL at L1 O APL>MPL at L2 AP >MPL at L1

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Ans (b)

From L2 to L3 we can see that output is increasing at decreasing rate. So that MPL will decrease but positive. And APL will also decrease.

So the relation between APL and MPL is that

1) when mpl is increasing MPL > APL

2) when mpl is decreasing MPL < APL

3) MPL =APL when APL is maximum, after that APL starts falling.

so here we have a case where mpl is falling,

so APL > MPL at L3

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