The table below shows output,marginal cost,and average variable cost for the production of pairs of shoes.All costs are in dollars.
TABLE 7-6
-Refer to Table 7-6.Suppose this firm is producing 210 pairs of shoes per time period and that the variable factor of production is labour.Which of the following statements best describes this firm's production?
A)Additional units of labour employed will increase the average variable cost of producing shoes.
B)Marginal cost is higher than average variable cost,so average product must be rising.
C)Marginal cost is higher than average variable cost,so marginal product must be rising.
D)Each additional unit of labour employed reduces the average variable cost of the pairs of shoes.
E)The firm is producing below its capacity.

Question

The table below shows output,marginal cost,and average variable cost for the production of pairs of shoes.All costs are in dollars.
  TABLE 7-6
-Refer to Table 7-6.Suppose this firm is producing 210 pairs of shoes per time period and that the variable factor of production is labour.Which of the following statements best describes this firm's production?
A)Additional units of labour employed will increase the average variable cost of producing shoes. 
B)Marginal cost is higher than average variable cost,so average product must be rising. 
C)Marginal cost is higher than average variable cost,so marginal product must be rising. 
D)Each additional unit of labour employed reduces the average variable cost of the pairs of shoes. 
E)The firm is producing below its capacity.

Quizplus · Accepted Answer

When additional units of labor increase the average variable cost, it indicates diminishing returns to labor, meaning each additional worker contributes less to output, raising the cost per unit.

The Table Below Shows Output,marginal Cost,and Average Variable Cost for the Production