Chapter 55, Problem 7MCQ

To determine

The cost that moves in opposite directions each time the quantity of output increases if labor is the only variable input and the wage rate is fixed.

Explanation of Solution

If labor is the only variable input and the wage rate is fixed then the marginal cost will reach its minimum when the marginal product of labor is increased due to the constant rate of wage.

Therefore, the correct option is e.

Economics Concept Introduction

Introduction:

Total cost is the sum of all costs or expenses that are incurred by a business firm while doing business activities.

Average total cost is determined by summing up the average variable cost and average fixed cost.

Marginal cost is the cost or expense that is occurred by using one additional unit of good. It is calculated by subtracting the previous total cost from the new total cost.