Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Question
Chapter 14, Problem 6MCQ
To determine
Choose the correct answer from the following options: An increase in the wage rate ____.
- Shifts the
average total cost curve and the marginal cost curve upward - Shifts the average fixed cost and
average variable cost curve upward - Increases average variable cost but does not change marginal cost
- Does not change average variable cost but increases average total cost
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Average total cost, average variable cost marginal cost and marginal product
b. The relationship between marginal product and marginal cost is reciprocal or
opposite. Why is it so? Explain.
Jake is a corn farmer in Nebraska. He rents his land on a long-term lease for $250,000 a year. He pays his farm hands $28,000 a year. Is his rent a fixed cost or a variable cost? Are the wages he pays his workers a fixed cost or a variable cost?
If a cost-minimization firm’s marginal product of labor equals 1 ton of output, while the marginal product of capital equals 7 tons of output and the cost of capital is $14 per unit, then
A.
The cost of labor must be $1/7
B.
The cost of labor (wage rate) must be $2
C.
The cost of labor must be $7
D.
The cost of labor must be $14 as well
Chapter 14 Solutions
Foundations of Economics (8th Edition)
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- 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?arrow_forwardAverage total cost, average variable cost marginal cost and marginal product a. Why is the gap or difference between average total cost and average variable cost larger at initial level of production ction and then the gap is decreasing as output increases? Explain.arrow_forward1.Explain how the marginal product of labor and marginal cost are related? Draw one graph for MPL (quantity of workers on x axis) and another for MC (quantity of output on x axis) that displays this relationship. 2. Explain what happens to average total costs when marginal cost is greater than average total costs? 3.Draw a precise graph that shows the following short-run cost curves: MC and ATC 4.Add the following to your graph from 3: AVC & AFC (pay particular attention to i) the starting points of these curves and ii) how these curve change relative to MC and ATC as output quantity increases). 5.Bonus: What happens to the difference between ATC and AVC as quantity increases? Why?arrow_forward
- The marginal cost curve crosses the*average total cost curve at the maximum of the average total cost curve.average variable cost curve at the minimum of the average variable cost curve.total cost curve at the minimum of the total cost curve.average fixed cost curve at the minimum of the average fixed cost curve. The average variable cost curve and average total cost curve tend to converge as output rises because*the marginal cost curve intersects the average total cost curve at its minimum.the average fixed costs are constant as output rises.the difference between them (average fixed cost) declines.output is rising more rapidly than inputs are being increased Monopoly and pure competition*are alike in that entry is easy in both.are alike in that entry is blocked in both.differ in terms of the number of firms in the industry.differ in that monopoly is associated with a standardized product and perfect competition associated with differentiated products. With respect to entry and exit,…arrow_forwardDraw 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.arrow_forwardMboth the marginal cost and the average variable cost curves are U-shaped, at the minimum point of the average variable cost curve, the marginal cost curve must be greater than average total cost. less than average total cost. equal to averagn total cost. at its minimum.arrow_forward
- 1. Explain the relationship between the shape of the marginal cost curve and the marginal product of labor curve.arrow_forwardA firm analyzes the effects of raising its current level of output and finds that doing so will cause its average total cost to increase. If the firm pays both fixed and variable costs of production, which of the following must be true? (Check all that apply) A. The effect of average variable cost increasing dominates the effect of average fixed cost decreasing B. The marginal cost is greater than the average total cost C. The marginal cost curve is less than the average total cost D. The effect of average fixed cost decreasing dominates the effect of average variable cost increasingarrow_forwardThe following is the production schedule of a certain firm. A unit of labor cost 50 pesos per hour and the rental price of capital is 100 pesos per hour. a. Fill in the column for average product and marginal product. b. Compute for the fixed cost, variable cost, total cost, average total cost, average fixed cost, average variable cost and marginal cost. Create columns for each of these cost functions.arrow_forward
- Why does the marginal cost of production typically increase as the amount of output produced increases? a.A fixed factor of production causes diminishing marginal product b.Increasing returns to scale c.There are no fixed factors of production d.Decreasing returns to scalearrow_forwardQUESTION 4 Match each of the following terms and descriptions v Average Fixed Cost v Average Total Cost A. variable costs divided by output B. the additional cost of producing one more unit Average Variable Cost C. fixed costs divided by output D. total cost divided by output Marginal Cost QUESTION 5arrow_forwardDistinguish between/ among a. The short run total fixed cost, total variable cost and total cost b. Implicit and explicit cost c.the short run avarage fixed cost, average variable cost and average total costarrow_forward
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