During recessions, American firms lay off a larger proportion of their workers t

Question

During recessions, American firms lay off a larger proportion of their workers than Japanese firms do. (lt has been claimed that Japanese firms continue to produce at high levels and store the output or sell it at relatively low prices during the recession.) Would you expect the average product of labor to be higher in Japan or the United States? Why? Assume that the production function remains unchanged over a period that is long enough to include many recessions and expansions, that Japanese and American firms have identical production functions, and that Japan and the U.S. produce using the same ratio of factors during good times. A. With diminishing marginal returns, the average product of labor is higher in Japan because the marginal product of labor rises when workers are laid off. B. With decreasing returns to scale, the average product of labor is higher in the U.S. because the marginal product of labor rises when workers are laid off C. With diminishing marginal returns, the average product of labor is higher in the U.S. because the marginal product of labor rises when workers are laid off 0 D. With constant returns to scale, the average product of labor is equal in the U.S. and Japan because the marginal product of labor does not change when workers are laid off O E. With diminishing marginal returns, the average product of labor is lower in the U.S. because the marginal product of labor decreases when workers are laid off

Explanation / Answer

1) The average product of labor is high in U.S because, Japanese firms still produced in the recession because the average product of Japanese firms is lower so, they can store the output for future use while the American firms do not produce in recession because their worker can produces very fast in future when the production starts. and we know that averge product of labor is simple mean the average output that a worker can produce. so we can say that the average product of labor is higher in U.S

2) The answer is C-) With diminishing marinal returns, the avregae product of labor is higher in the U.S because the marginal product of labor rises when workers are laid off.

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