1. An increase in the price of fuel increases the average cost of production of
ID: 1094528 • Letter: 1
Question
1. An increase in the price of fuel increases the average cost of production of fabric produced by the Houchen Textile
Company, a competitive firm. As a result of the increase in the price of fuel,
a. average cost of production will increase, as will the profit-maximizing level of output.
b. fixed costs of production will increase.
c. average cost of production will increase and the profit-maximizing level of output will decline.
d. average cost of production will increase, but there will be no change in the profit-maximizing level of output.
2.
The table below shows how the output of surfboards varies in a small factory with the number of workers used per day.
Based on these data, the marginal product of workers in the factory
Select one:
a. is at a maximum when 5 workers are employed.
b. increases steadily as more workers are employed.
c. will start to decline when a third worker is employed.
d. will be the same, no matter how many workers are employed.
Labor Output (Number of Workers per Day) (Number of Surf Boards per Day) 1 5 2 11 3 15 4 17 5 19Explanation / Answer
1.c. average cost of production will increase and the profit-maximizing level of output will decline.
2.b. increases steadily as more workers are employed.
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