Capital is fixed at 1 unit. The output for different units of labour is then:
| Labour (units) | 1 | 2 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|
| Output (units) | 1 | 3 | 7 | 10 | 12 | 13 |
From which unit does the marginal product of labour start falling, and at which unit is the average product of labour the highest?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → MP starts falling from the 4th unit; AP is highest at the 4th unit
Given:
Labour: 1, 2, 3, 4, 5, 6 units
Output: 1, 3, 7, 10, 12, 13 units
MP is the change in output from one more unit of labour. AP is output divided by labour.
\( MP: 1,\ 2,\ 4,\ 3,\ 2,\ 1 \)
\( AP: 1,\ 1.5,\ 2.33,\ 2.5,\ 2.4,\ 2.17 \)
MP is highest at the 3rd unit and starts falling from the 4th unit. AP is highest at the 4th unit, since MP of the 4th unit (3) is still above AP (2.33). MP of the 5th unit (2) is below AP (2.5), so AP falls after that.
NCERT (2026-27): “3.4 The Law of Diminishing Marginal Product and the Law of Variable Proportions … Notice that the MP first increases (upto 3 units of labour) and then begins to fall. This tendency of the MP to first increase and then fall is called the law of variable proportions or the law of diminishing marginal product. Law of variable proportions say that the marginal product of a factor input initially rises with its employment level. But after reaching a certain level of employment, it starts falling.” “3.5 Shapes of Total Product, Marginal Product and Average Product Curves … As long as the AP increases, it must be the case that MP is greater than AP. Otherwise, AP cannot rise. Similarly, when AP falls, MP has to be less than AP. It, follows that MP curve cuts AP curve from above at its maximum.” |