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- How do we calculate marginal product?What is the relationship between marginal product and marginal cost? (Hint: Look at the curves.) Why do you suppose that is? Is this relationship the same in the long run as in the short run?What shape of a long-run average cost curve illustrates economies of scale, constant returns to scale, and diseconomies of scale?
- What is the difference between economies of scale, constant returns to scale, and diseconomies of scale?Do you think that the taxicab industry in large cities would be subject to significant economies of scale? Why or why not?Which costs are measured on per-unit basis: fixed costs, average cost, avenge variable cost, variable costs, and marginal cost?
- What shapes would you generally expect each of the following cost curves to have: fixed costs, variable costs, marginal costs, average total costs, and average variable costs?A common name for fixed cost is overhead. If you divide fixed cost by the quantity of output produced, you get average fixed cost. Supposed fixed cost is 1,000. What does the average fixed cost curve look like? Use your response to explain what spreading the overhead means.How does fixed cost affect marginal cost? Why is this relationship important?
- Average cost curves (except for avenge fixed cost) tend to be U-shaped, decreasing and then increasing. Marginal cost curves have the same shape, though this may be harder to see since most of the marginal cost curve is increasing. Why do you think that average and marginal cost curves have the same general shape?A firm is considering an investment that will earn a 6 rate of return. If it were to borrow the money, it would have of pay 8 interest on the loan, but it currently has the cash, so it will But need to borrow. Should the firm make line investment? Show your work.(6) If marginal product is greater than average product (a) total product must be increasing. (b) marginal product must be decreasing. (c) marginal product must be increasing. (d) average product may be increasing or decreasing.
