ECONOMICS
PROFIT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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MC doesn’t change, AVC doesn’t change, ATC shifts up, AFC doesn’t change
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MC doesn’t change, AVC doesn’t change, ATC shifts up, AFC shifts up.
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MC shifts up, AVC shifts up, ATC shifts up, AFC doesn’t change
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MC shifts up, AVC doesn’t change, ATC doesn’t change, AFC doesn’t change.
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Detailed explanation-1: -If labor is the only variable input in the production process, the short-run marginal cost curve is upward sloping because which of the following occurs as more and more labor is added? Output increases at a decreasing rate, and thus the cost of producing each additional unit of output increases.
Detailed explanation-2: -When a firm’s only variable input is labor, the average variable cost (AVC): A. rises when the marginal product of labor rises.
Detailed explanation-3: -As more of a variable factor (e.g. labour) is added to a fixed factor (e.g. capital), a firm will reach a point where it has a disproportionate quantity of labour to capital and so the marginal product of labour will fall, thus raising marginal cost and average variable cost.
Detailed explanation-4: -Which of the following is true for a firm that uses labor as a variable input and capital as a fixed input in the short run? If the marginal product of labor is negative, the average product of labor must also be negative.