Suppose that your factory faces a total product and average variable cost curve. Total Product...
Question:
Suppose that your factory faces a total product and average variable cost curve.
| Total Product | Variable Costs |
|---|---|
| 1 | $18 |
| 2 | 30 |
| 3 | 39 |
| 4 | 45 |
| 5 | 54 |
| 6 | 69 |
| 7 | 90 |
| 8 | 120 |
If labor costs $3 per unit, and you have fixed costs of $50, construct tables showing your total costs, average cost, and average variable cost.
At approximately what point does the second stage of production begin?
At approximately what point do diminishing marginal returns to labor set in?
Stages of production:
Variable Costs are costs that vary with the level of output. Total cost is the sum of fixed costs and variable costs. Marginal Cost is the increase in cost caused by producing one more unit of the good. The law of diminishing returns implies that marginal cost will rise as output increases. Eventually, rising marginal cost will lead to a rise in average total cost.
When diminishing returns set in the marginal cost curve starts to rise. Average total cost continues to fall until the point where the rise in average variable cost equates with the fall in average fixed cost.
Answer and Explanation: 1
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View this answer| Total Product | Variable cost (in dollars) | Average Variable Cost(AVC) | Total Cost (in dollars) | Average Cost (in dollars) | Marginal Cost (in dollars) |
|---|---|---|---|---|---|
| 1 | 18... |
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Total Product, Average Product & Marginal Product in Economics
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Chapter 4 / Lesson 2
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In Economics, there are three factors involved in the theory of production: total product, average product, and marginal product. Explore this theory and learn how to maximize the efficiency of these production tools.
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