Author Question: The short-run aggregate supply curve is vertical. Indicate whether the statement is true or ... (Read 89 times)

RODY.ELKHALIL · **on:** Jun 29, 2018

The short-run aggregate supply curve is vertical.

Indicate whether the statement is true or false

Question 2

Assume that a company is producing at a point beyond where diminishing returns has already set in. If the firm cuts back on production what would you expect should happen to the marginal product of labor and why?

What will be an ideal response?

dmurph1496 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

FALSE

Answer to Question 2

Marginal product should begin to rise. The reason is that if the firm is already operating beyond the point of diminishing returns this means that marginal product has already begun to fall. So it stands to reason that by cutting back on production the marginal product of labor would rise.