Question

In the short run, marginal cost will                            [ Select ]                       ["remains fixed", "decrease", "increase"]         if the marginal productivity of labor increases. This is because                            [ Select ]                       ["capital cannot be varied in short-run", "productivity of capital declines", "workers are more productive", "labor cannot be varied in short-run"]         .

In the short run, the marginal cost depends on what type of costs?

(a) variable cost

(b) fixed cost

(c) average cost

(d) rental rate

Answer 1

Ans: In the short run, marginal cost will decrease , if the marginal productivity of labor increases. This is because workers are more productive.

Explanation:

There is an inverse relationship between marginal cost and marginal product.In the initial stage of production , the marginal product of labor increases due to an increase in thier productivity.

Marginal cost = Change in Total cost / Change in Quantity

MP = Change in Total Product / Change in number of labor

Ans: a) variable cost

Explanation:

In the short run, the marginal cost depends on variable costs. Fixed cost are available even at zero level of output and remain constant throughout the subsequent level of production. So total cost increases / decreases due a change in the variable cost in the short-run.

Marginal cost = Change in Total cost / Change in Quantity