When average product is maximum, marginal product is equal to:
Options
ATotal product
BZero
COne
DAverage product
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Theory of Production and CostPYQ - Dec 2022Question 51 of 20
All Questions Correct Answer
✅ Option d — Average product
All Options:
- ATotal product
- BZero
- COne
- DAverage product
Detailed Solution & Explanation
To understand this concept, we need to analyze the relationship between average product and marginal product.
• The average product is the total output per unit of a variable input, such as labor.
• The marginal product is the change in total output when one more unit of the variable input is added.
When the average product is at its maximum, it means that the total output is being produced most efficiently with the given inputs.
• At this point, adding one more unit of the variable input will not increase the average product, so the marginal product will be equal to the average product.
This is because if the marginal product were higher than the average product, the average product would increase, and if it were lower, the average product would decrease.
The incorrect options can be eliminated because if marginal product were zero, it would mean that adding more input does not increase output, and if it were equal to total product, it would not make economic sense in this context.
About This Chapter: Theory of Production and Cost
Paper
Paper 4: Business Economics
Weightage
10%
Key Topics
Function, Cost Concepts (Short/Long Run)
This chapter explores how firms produce goods and services. It covers Production Functions, the Laws of Returns (Increasing, Constant, Diminishing), and all cost concepts including Total Cost, Average Cost, Marginal Cost, Fixed Cost, and Variable Cost. Understanding why the AC and MC curves are U-shaped is crucial for exam success.
View Official ICAI SyllabusExam Strategy Tip
The relationship between MC and AC curves is a favorite examiner topic. Remember: MC cuts AC at its minimum point. Also focus on the difference between Short Run and Long Run cost curves.
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