How is average labor productivity calculated?

Average labor productivity is calculated by taking the total output produced and dividing it by the quantity of labor employed in its production. This measure reflects how efficiently labor is used to generate goods and services within an economy or a specific production process. Higher average labor productivity indicates that workers produce more output per unit of labor, which is essential for economic growth and improving living standards.

For instance, if a factory produces 1,000 units of product with 10 workers, the average labor productivity would be 100 units per worker. This calculation helps assess the effectiveness of labor, enabling managers and policymakers to make informed decisions about resource allocation and labor management.

The other options do not accurately describe average labor productivity. The total number of hours worked measures the volume of labor utilized but does not account for the output produced, while total GDP divided by the number of firms does not accurately determine labor efficiency relative to productivity. Finally, while the value of goods produced per employee might seem relevant, it lacks the clarity and specificity that is achieved by directly relating total output to the quantity of labor employed in its production.