Final answer:
Labor productivity is calculated by dividing the total product by the number of labor employed, reflecting how efficiently labor is used in production.
Step-by-step explanation:
The average productivity of labor can be defined as B) Total product divided by the number of labor employed. This measurement is crucial for businesses as it indicates the efficiency of labor in producing goods or services. The concept is directly related to a firm's operations and is significantly influenced by factors such as technology used, skills of the workforce, and operational processes. An increase in labor productivity suggests a more efficient use of labor, which often leads to higher wages and lower average total costs of production. However, this is subject to certain principles such as diminishing marginal productivity, which states that adding more labor may eventually lead to a decreased additional output.