If another worker is hired with a marginal product greater than the previously hired worker,which of the following will be true?
A)Total costs will decrease.
B)Fixed costs will decrease.
C)Marginal cost will increase.
D)Marginal cost will decrease.
E)Average fixed costs will increase.

Question

Quizplus · Accepted Answer

If the marginal product of the newly hired worker is greater than the previous worker, it means that the firm is getting more output per unit of labor input. This will lead to a decrease in marginal cost, as the additional worker is increasing output by a greater amount than the additional cost of hiring them. Total costs may increase if the wage rate for the new worker is higher, but this is not always the case. Fixed costs are not affected by the hiring of a new worker, so B is incorrect. Average fixed costs are not affected by the marginal product of labor, so E is also incorrect.

If Another Worker Is Hired with a Marginal Product Greater