Problem Set 5

1. Are the following statements correct or incorrect?

(a) If average product is increasing, marginal product must be less than average product.

(b) If marginal product is negative, average product must be negative.

(c) If average product is positive, total product must be rising.

(d) If total product is increasing, marginal product must also be increasing.

2. A rm produces a quantity Q of breakfast cereal using labor L and material M with the pro-
√
duction functionQ = 50 ML + M + L.

(a) Are the returns to scale increasing, constant, or decreasing for this production function?

(b) Is the marginal product of labor ever diminishing for this production function? If so,

when? Is it ever negative, and if so, when?