Question

1) Suppose a firm is currently operating with decreasing marginal returns and the marginal cost of...

1)

Suppose a firm is currently operating with decreasing marginal returns and the marginal cost of the last unit produced was $40. Which of the following may be the marginal cost of the next unit?

Group of answer choices

a $50

b $40

c $30

d $20

2)

Suppose a producer currently is experiencing decreasing marginal returns. This means that as they produce more

Group of answer choices

a Total variable costs will increase at a decreasing rate

b Total variable costs will decrease at a decreasing rate

c Total variable costs will increase at an increasing rate

d Total variable costs will decrease at an increasing rate

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Homework Answers

Answer #1

1.Decreasing marginal returns means that marginal product is decreasing and marginal cost is increasing. If marginal cost for last unit produced = $40 , then the marginal cost of the next unit would be greater than $40 . Therefore, the MC of the next unit = $50.Hence, option(A) is correct.

2. Suppose a producer is currently is experiencing decreasing marginal returns. This means that as they produce more total variable costs will increase at an increasing rate.This means that marginal cost is increasing. Hence, option(C) is correct.

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