Applying a price of labor to the law of diminishing returns generates: Select on

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Applying a price of labor to the law of diminishing returns generates:

Select one:

a. the law of increasing costs.

b. a negatively-sloped labor supply curve.

c. less output as more labor is hired.

d. differences in the quality of labor.

e. specialization and the division of labor.

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What is the shape of the average fixed cost curve for a firm in the short run?

Select one:

a. A curve that constantly increases as output expands and eventually approaches infinity at high rates of output.

b. U-shaped.

c. A vertical line.

d. A curve that declines as output expands and approaches the horizontal-axis when output is large.

Question 21

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Which of the following is an example of a fixed cost for a fishing company?

Select one:

a. The cost of hiring a fishing crew.

b. The monthly loan payment on the boat.

c. Bait.

d. The supply of nets, hooks, and fishing lines.

e. The fuel costs of running the boat.

Question 22

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Select one:

a. zero.

b. minimum.

c. positive.

d. negative.

Question 23

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A characteristic of an oligopoly is:

Select one:

a. none of these.

b. mutual interdependence in pricing decisions.

c. lack of control over prices.

d. independent pricing decisions.

Question 24

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A firm is currently operating where the MC of the last unit produced = $64, and the MR of this unit = $70. What would you advise this firm to do?

Select one:

a. Decrease price.

b. Stay at current output.

c. Increase output.

d. Decrease output.

e. Shut down.

Question 25

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Select one:

a. 0.

b. 5,000.

c. 1,000.

d. 6,000.

e. 3,000.

Explanation / Answer

First question is answered below.

Correct option: (A) law of increasing costs

The law of diminishing returns states that as more labor is hired, additional output produced by each labor tends to fall. Since wages paid are fixed to each labor, as more labor is paid, more wages are paid out, but contribution made by them decreases. This is known as the law of increasing costs.

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