Average Product and the Stages

Two questions about the same crew of workers:

Marginal product — what does the next worker add?
Average product — how much does each worker produce, on average?

Same data, two different views — and the link between them is one of the cleanest patterns in economics.

Key Term

Average Product of Labor (APL)

$A P_{L} = \frac{q}{L}$

Average product of labor (APL) is total output divided by the number of workers — output per person. If 4 workers produce 80 drinks an hour, APL is 20 drinks per worker.

Total output divided by the number of workers.

Think of your exam average. Suppose your current average is 75:

Next exam scores 80 (above average) → your average goes up.
Next exam scores 60 (below average) → your average goes down.
Next exam scores exactly 75 → your average doesn’t move.

The next score always pulls the average toward itself.

Workers behave the same way. Each new worker is like your next exam; their output is the score:

Next worker produces more than the current average ( $M P_{L} > A P_{L}$ ) → average rises.
Next worker produces less than the average ( $M P_{L} < A P_{L}$ ) → average falls.
Next worker produces exactly the average ( $M P_{L} = A P_{L}$ ) → average is at its peak.

Interactive — AP, MP, and the Three Stages

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The coffee-shop data from KP 1, extended to L = 6. AP and MP plotted together; step buttons walk through Stage I, II, and III.

That crossing isn’t a coincidence — the average always peaks exactly where the marginal cuts through it from above. The batting-average rule, made visible.

Tip

The three stages, plainly

Stage I — too few workers. The next worker produces more than the current average, so $A P_{L}$ is still rising. The firm has more capital than it can use; clearly it should hire more.

Stage II — the firm’s working zone. Each new worker still adds output ( $M P_{L} > 0$ ), but adds less than the one before. $A P_{L}$ is falling, but workers are still pulling their weight. Every real firm operates here.

Stage III — too many workers. Output actually falls when one more is hired ( $M P_{L} < 0$ ) — they’re tripping over each other. No firm pays a positive wage to lose output, so no one operates here.

Check yourself · no marks

A factory has 10 workers producing 500 units (APL = 50). The 11th worker would add 40 units (MPL = 40). Will APL rise or fall?

Commit to one first. Guessing and being wrong beats reading the answer cold.

Practice · 1 / 4

No penalty for a wrong answer

Test your understanding of average product and the stages:

A firm has 8 workers and total output of 200 units. What is its average product of labor?

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