In the context of a fixed plant size, what typically happens to the average product of labor as additional units of labor are added?

• A. It immediately decreases as more labor is added.
• B. It continuously increases with each additional unit of labor.
• C. It remains constant regardless of the number of workers added.
• D. It initially increases, reaches a maximum, and then decreases.

Answer: (D)

Verified step by step guidance

1. Understand the concept of average product of labor (APL), which is defined as the total output produced divided by the number of labor units employed. Mathematically, \(APL = \frac{Total\ Output}{Labor}\).
2. Recognize that with a fixed plant size (fixed capital), adding more labor initially leads to better utilization of the fixed resources, causing the average product of labor to increase.
3. As more labor is added beyond a certain point, diminishing marginal returns set in because the fixed capital becomes a constraint, making each additional worker less productive on average.
4. This results in the average product of labor reaching a maximum point and then starting to decline as overcrowding or inefficiencies occur.
5. Summarize that the typical behavior of average product of labor with a fixed plant size is: it initially increases, reaches a peak, and then decreases as more labor is added.