Final answer:
Average productivity falls when it exceeds the marginal productivity of workers due to the Law of Diminishing Marginal Product, which describes how average output declines as additional labor is added beyond a certain point.
Step-by-step explanation:
The question asks about the conditions under which average productivity falls. The correct answer is B) it exceeds marginal productivity.
Average productivity will decline when it is higher than the marginal productivity, because as more units of labor (workers) are employed, at some point each additional worker contributes less to the output than the average of the previous workers already employed.
This is known as the Law of Diminishing Marginal Product, a phenomenon that occurs because capital is often fixed in the short run, meaning that the additional output an extra worker produces will eventually decrease.
An example that highlights this is the production process that involves typing; it is optimized for one worker with one PC. If more typists are added beyond this optimal point, the marginal productivity declines sharply, demonstrating diminishing marginal returns.
Average productivity will fall as long as marginal productivity is falling. This is because as more workers are added, the additional output they produce decreases.
This is known as the Law of Diminishing Marginal Productivity, which states that adding more workers beyond a certain point leads to decreasing productivity.