The table below shows a firm\'s fixed cost, variable cost, total cost, and margi

Question

The table below shows a firm's fixed cost, variable cost, total cost, and marginal cost of producing different quantities of output. Complete the Table and determine the marginal cost of producing 6 units of output? This Table shows a firm's total product and the marginal product of different units of labor. Complete the table; the marginal product is zero when the worker is hired. Explain the concept of diminishing marginal returns, and what happens to the marginal cost of output (in relation to quantity produced).

Explanation / Answer

(1)

When Q = 4, TC = FC + TVC = $(150 + 200) = $350

When Q = 6, TC = $400.

So, MC when Q = 6 is

MC = Change in TC / Change in Q = $(400 - 350) / (6 - 4) = $50 / 2 = $25

(2)

MPL = Change in TP / Change in number of workers

When number of workers = 2, MPL = 11 - 5 = 6

When number of workers = 3, MPL = 15 - 11 = 4

When number of workers = 5, MPL = 17 - 17 = 0

MPL is 0 when 5 workers are hired.

(3)

Principle of diminishing marginal returns states that, as more units of input are added in production, total product (Output) increases at a decreasing (diminishing) rate. So, marginal product is diminishing.

Initially, with addition of more inputs, marginal cost (MC) keeps decreasing (as economies of scale sets in), but after a threshold, MC starts increasing (due to diseconomies of scale).

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