Scenario 13-17
Suppose that a given firm experiences decreasing marginal product of labor with the addition of each worker regardless of the current output level.
-Refer to Scenario 13-17.Average variable cost will be
A) rising at all points.
B) falling at all points.
C) U-shaped.
D) constant.

Question

Quizplus · Accepted Answer

Since the marginal product of labor is decreasing, each additional worker will increase the firm's variable costs but by a smaller amount than the previous worker. This means that the average variable cost will rise at all points, resulting in an upward sloping AVC curve.

Scenario 13-17 Suppose That a Given Firm Experiences Decreasing Marginal Product of Product