Question

Explain please once answered.

Adding a variable input (labor) to a fixed input (capital) will result in an increase in output:

Until the marginal product of labor is maximized.

Until the average product of labor begins to fall.

Until the marginal product of labor is becomes 0.

As a firm adds labor beyond the point of diminishing returns:

Total output continues to rise

Total output is maximized

Total output remains constant

When q = 100, ATC is 10 and AVC is 6. From this we know that when q = 50

AFC = 8

None of these answers is correct

AVC = 8

Answer 1

Ans:

1) Until the marginal product of labor is becomes 0.

Increase in variable input(labor) will result in increase in output until the marginal product of labor becomes zero.

2) Total output continues to rise

Diminishing returns means marginal output is decreased. However increase in input(labor)  beyond the point of diminishing returns total output continuous to rise even though marginal output is decreased.

3) AFC = 8

Total cost = Average total cost * quantity

= 10 * 100

= 1000

Total variable cost = Average variable cost * quantity

= 6 * 100

Total fixed cost = Total cost - Total variable cost

= 1000 - 600

= 400

Average fixed cost(AFC) = Fixed cost / quantity , where quantity(q) = 50

= 400 / 50

= 8