Question
When both Average Product (AP) and Marginal Product (MP)
are falling, it indicates the operation of which economic law?Solution
When both Average Product (AP) and Marginal Product (MP) are falling, it indicates the operation of the Law of Diminishing Marginal Returns. This law states that as more units of a variable input are added to a fixed input, the marginal product of the variable input will eventually decline, and consequently, so will the average product.
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