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d. Over what output range does the firm enjoy the benefits of increased specialization and division of labor?

The firm enjoys the benefits of increased specialization and division of labor over the range of output for which the marginal cost decreases. This range of output is the same range over which the marginal product of labor rises. For Sue’s Surfboards, the benefits of increased specialization and division of labor occur until 2.5 workers are employed.



e. Over what output range does the firm experience diminishing marginal product of labor?

The marginal product of labor decreases after 2.5 workers are employed.



f. Over what output range does this firm experience an increasing average product of labor but a diminishing marginal product of labor?

The marginal product of labor decreases and the average product of labor increases between 2.5 and 3.5 workers.




g. Explain how it is possible for a firm to experience simultaneously an increasing average product but a diminishing marginal product.


As long as the marginal product of labor exceeds the average product of labor, the average product of labor rises. For a range of output the marginal product of labor, while decreasing, remains greater than the average product of labor, so the average product of labor rises. Each additional worker, while producing less than the previous worker hired is still producing more than the average worker.