ECON MICRO
5th Edition
ISBN: 9781337000536
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 7, Problem 3.7P
b)
To determine
Marginal Product of the third unit of labor
c)
To determine
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Question-1
The table below shows the short run cost for producing bicycles.
Complete all missing values in table below:
Marginal cost
Average total cost
Average variable cost
Average fixed cost
Total cost
Variable cost
Fixed cost
Output
Labor
0
$60
0
0
70$
$60
1
1
$140
$60
6
2
$210
$60
11
3
280$
$60
15
4
$350
$60
13
5
$420
$60
12
6
Draw the short run total cost curve (show the total cost, fixed cost, variable cost).
Where the marginal cost and average total cost intercept? Explain the relationship between the marginal cost and the average total cost with the help of graph.
1. True or False: explain why your answer is true or false
a. We can expect the average cost curve of a software product downloadable in the internet to have no minimum point.
b. Decreasing returns to scale implies that production exhibits economies of scale.
c. Fixed costs tend to infinity when output is zero
d. While the distance between the total and variable cost curves does not change, the distance between the average total cost and the average variable cost curves decreases with increasing output.
e. In general, production can display diminishing returns in all variables but still display increasing returns to scale. Explain your answer.
(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.
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