The correct answer is C. The average product of labour is falling.
The marginal product of labor is the additional output produced by an additional unit of labor. The average product of labor is the total output produced by a group of workers divided by the number of workers.
If the marginal product of labor is below the average product of labor, it means that the additional output produced by an additional worker is less than the average output produced by all the workers. This can happen because as more workers are added, the additional output produced by each worker decreases. This is because workers start to get in each other’s way and there are diminishing returns to labor.
When the marginal product of labor is below the average product of labor, the average product of labor is falling. This is because the additional output produced by each worker is less than the average output produced by all the workers. This means that the average output produced by all the workers is decreasing.
A. The marginal product of labor is negative. This is not necessarily true. The marginal product of labor can be negative if the additional output produced by an additional worker is less than the cost of hiring that worker. However, it is also possible for the marginal product of labor to be positive even if it is below the average product of labor.
B. The marginal product of labor is zero. This is also not necessarily true. The marginal product of labor can be zero if the additional output produced by an additional worker is equal to the cost of hiring that worker. However, it is also possible for the marginal product of labor to be positive even if it is below the average product of labor.
D. The average product of labor is negative. This is true if the marginal product of labor is below the average product of labor. However, it is also possible for the average product of labor to be positive even if the marginal product of labor is below the average product of labor.