Suppose that a firm’s only variable input is labor.
When 50 workers are used, the average product of
labor is 50, and the marginal product of the 50th
worker is 75. The wage rate is $80, and the total
cost of the fixed input is $500.
a. What is average variable cost? Show your
calculations.
b. What is marginal cost? Show your calculations.
c. What is average total cost? Show your
calculations.
d. Is each of the following statements true or
false? Explain your answer.
1. Marginal cost is increasing.
2. Average variable cost is increasing.
3. Average total cost is decreasing
