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)