A factory faces a total product curve that contains the following points. Quantity of Labour: 6,...


A factory faces a total product curve that contains the following points:

Quantity of Labour Total Product FC VC TC AC AVC MC
6 1
10 2
13 3
15 4
18 5
23 6
30 7
40 8

(a) If labor costs $2 per unit, and the firm has a fixed cost of $30, construct tables showing variable cost, total cost, average cost and average variable cost curves.

(b) At approximately what point do diminishing marginal returns to labor set in?

Costs of Production in the Short-Run:

In the short-run, firms have two types of costs: Fixed costs and Variable costs. The sum of these two costs is the total cost of production. In the short-run at least one input is fixed and the cost of fixed input or inputs are called fixed costs. The costs of variable inputs are called variable costs.

Answer and Explanation: 1

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(a) Fixed costs are the costs paid to fixed input regardless of the amount of production. Hence fixed cost is always $30, whether the firm produces 1...

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Short-Run Costs vs. Long-Run Costs in Economics


Chapter 4 / Lesson 12

Learn about short run vs. long run economics. Examine the definitions of short run and long run economics, and study examples of short and long run costs.

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