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3. We often work with production technologies that give rise to initially increasing marginal product of labor that eventually decreases. Are the following statements then True or False? Explain.If the marginal product of labor ever becomes zero, we know that the production frontier becomes perfectly flat at that point.

Question

3. We often work with production technologies that give rise to initially increasing marginal product of labor that eventually decreases. Are the following statements then True or False? Explain.

If the marginal product of labor ever becomes zero, we know that the production frontier becomes perfectly flat at that point.

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Step 1

Marginal product of labour is the change in output obtained by hiring one additional labour unit keeping all other inputs constant.  Marginal product of labour will initially increase because of production technology as there is division of labour leading to specialization. But the  magnitude of improvement in output decreases eventually as other inputs are fixed and those inputs are now split amongst more labor units.  This is what the law of diminishing marginal product of labor states-  with every unit increase in labor (keeping  other inputs constant), marginal prodcut of labor initially increases and eventually falls.

Step 2

We know that , Marginal Product of labor = Change in output / Change in labor unit

So graphically MPL is slope of the production frontier curve as can be seen from the graph bel...

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