The Average Product of an input will fall in which of the following scenario?
Answer & explanation
Correct answer: option 4
The correct answer is Option 4: all of the above
Average Product (AP) = Total Product (TP) / Quantity of Input
AP falls in the following scenarios:
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When TP increases at a diminishing rate (Correct)
- When TP is still increasing but at a slower rate, Marginal Product (MP) starts declining.
- Since MP < AP, AP also begins to decline.
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When TP is maximum and constant (Correct)
- At the maximum point of TP, Marginal Product (MP) is zero.
- Since MP < AP, AP starts to fall.
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When TP decreases (Correct)
- When TP declines, MP becomes negative, which pulls AP down further.
Since AP falls in all these scenarios, the correct choice is: