Food manufacturers are usually less affected by recessions than are firms in oth
ID: 1131196 • Letter: F
Question
Food manufacturers are usually less affected by recessions than are firms in other industries Nonetheless, during major economic downturns, the demand curve for food products may shift to the left, and firms must consider whether to reduce production by laying off some workers. To make this decision, firms face a managerial problem: How much will the output produced per worker rise or fall with each additional layoff? Consequently. will productivity, as measured by the average product of labor, rise or fall during a recession? For some production functions, layoffs always raise labor productivity because the APL curve is downward sloping everywhere. For example, layoffs raise the average product of labor for any Cobb-Douglas production function, ALTK where s greater than zero and less han one. Thus, in man US industries such as he ood and kindred products industr. when workers are aid o ou ng a recess on, a or ro ct it nses. Tis n r a e n o productivity reduces the impact of the recession on output in the United States How would this answer change if we used the marpinal product of labor rather than the average product of labor as our measure of labor productivity? Assume the food and kindred products industry is accurately represented with a Cobb-Douglas production function where is less than one. Laying off workers will result in the marginal product of labor OA. increasing because the MPt curve intersect the AP curve for the AP to be everywhere downward sloping. C. increasing because the MPL curve must be downward sloping for the APL curve to be everywhere downward sloping O D. decreasing because the MPL curve must be downward sloping for the APL curve to be everywhere downward sloping OE. decreasing because the MP curve must be upward sloping for the APL curve to be everywhere downward slopingExplanation / Answer
B is correct option.
This is because suppose at recession we are at point where Marginal product is equal to average product . Now if we decrease labour then marginal product will increase and when margin product is increasing average product wil always be below marginal product.