What describes the graphical relationship between average product and marginal product?
A) Average product cuts marginal product from above, at the maximum point of marginal product.
B) Average product cuts marginal product from below, at the maximum point of marginal product.
C) Marginal product cuts average product from above, at the maximum point of average product.
D) Marginal product cuts average product from below, at the maximum point of average product.
E) Average and marginal product do not intersect.
C
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Refer to the above figure. Suppose the relevant aggregate demand curve is AD2. If the government wants to use discretionary fiscal policy to close the existing gap, it should
A) decrease taxes. B) increase taxes. C) increase the money supply. D) decrease government spending.
If a contestable market has only one seller, which of the following will keep the seller from producing inefficiently and charging a price that generates long-run economic profits?
a. government regulations b. low costs of entry into and exit from the market c. substantial economies of scale that provide a competitive advantage to large firms in such markets d. the threat of a government takeover of the firms in these markets