AP microEcon unit 3

If a firm's production function exhibits diminishing marginal product of the variable input in the short run, which of the following about the firm's short-run marginal cost (MC) curve must be true?

As output increases, the MC curve slopes upward.

For a firm where labor is the only variable input, which of the following happens when diminishing returns set in?

Marginal cost begins to increase.

Assume that labor is the only variable input. If a firm's short-run marginal cost is increasing as output rises, which of the following must be true?

Marginal product of labor is decreasing.

A firm is producing 100 units of output at a total cost of $400. The firm's average variable cost is $3 per unit. What is the firm's total fixed cost?

$100

If labor is the only variable input and it costs $15 per hour and if the marginal product of labor is 3 units per hour, the short-run marginal cost of 1 unit of output is approximately

$5.00

Locotek produces toy trains and pays each worker $350 per week. Five workers can produce 40 trains per week and six workers can produce 45 trains per week. The marginal product per week of the sixth worker is

5 trains

Which of the following must be true if at the tenth unit of output, marginal cost (MC) is $130 and average total cost (ATC) is $150?

ATC of producing the ninth unit is higher than $150

Which of the following provides an example of the law of diminishing returns?

As more of a variable input—for example, labor is used with a fixed number of machines— output increases but at a diminishing rate.

If labor is the only variable input in the production process, the short-run marginal cost curve is upward sloping because which of the following occurs as more and more labor is added?

Output increases at a decreasing rate, and thus the cost of producing each additional unit of output increases.

A competitive firm produces a product using labor and plastic. The firm is initially in equilibrium. If the cost of plastic suddenly increases, which of the following will occur?

The firm's marginal costs will increase at each level of output.

As more of a variable input is added to a fixed input, output eventually increases at a decreasing rate. This is a short-run concept using one variable input and at least one fixed input.

The law of diminishing returns

In the short run, assume diminishing marginal product of labor sets in with the hiring of the second worker. Which of the following will remain constant as a firm produces more output?

Total fixed cost

Short-run marginal costs eventually increase because of the effects of

diminishing marginal product

As its output increases, a firm's short-run marginal cost will eventually increase because of

diminishing returns

A firm's short-run production function uses capital and labor as inputs. Assume the quantity of capital is fixed in the short run. The marginal product of labor will decrease as more labor is used in the short run because each unit of labor will have

fewer units of capital to work with

If a firm's average total cost decreases as the firm increases its output, the firm's marginal cost must be

less than the average total cost

As output of a firm increases, the difference between the firm's average total cost and its average variable cost gets smaller because the firm's

marginal cost is increasing

Suppose that a firm begins to hire workers for a newly completed plant with a fixed amount of machinery. As the firm hires additional workers, one would expect the marginal product to

se initially, but eventually fall