Costs of Production
Why would a business continue to produce additional units of an item after the marginal cost begins to rise?
in order to increase their profit
How does the marginal product of labor change as more workers are hired?
it produces an increase in output for the company because the labor has increased. eventually this will lead to diminishing returns
What is the impact of diminishing marginal returns on labor?
labor increases → output decreases because there are just too many workers
What is a fixed cost, variable cost, and total cost? Explain the relationship between the three.
Fixed cost: cost despite production (what u know ur gonna pay. Same amnt). Variable cost: changes based upon quantity being produced (labor, raw materials) Marginal cost: additional cost to produce one more unit
Explain the 3 stages of production
Increase in returns Diminish in returns Negative returns
What is the Theory of Production?
The relationship between the factors of production and output
A firm has two factories, one twice as large as the second. As the number of workers at each factory increases, which factory will experience diminishing returns first?
The smaller factory (not as much output)