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

## Question:

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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View this answer(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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Chapter 4 / Lesson 12Learn 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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