Assuming that labor is the only variable input with a fixed production facility, explain the relationship between the marginal product of labor and the marginal production cost.
What will be an ideal response?
The marginal product of labor is the change in output from one additional worker. Suppose the marginal product of labor decreases as more workers are added to the production. It implies that output will increase at a decreasing rate because the additional contribution to the output from an additional worker becomes smaller. In other words, an additional output becomes more costly as more output is produced. Thus diminishing marginal returns lead to an increase in marginal cost.
You might also like to view...
Bonds that pay no periodic (annual) interest are
A) zero-coupon bonds. B) coupon securities. C) perpetuities. D) tax-exempts.
In comparing tariffs and quotas, we know that
A) neither raises revenues for the federal government. B) both raise revenues for the federal government. C) tariffs raise revenues for the federal government, while quotas do not. D) quotas raise revenues for the federal government, while tariffs do not.
Factory A can reduce emissions at a cost of $250 per ton. Factory B can reduce emissions at a cost of $400 per ton. In a system in which the government issues transferable pollution right at a price of $200 per ton:
a. Factory A can profit from selling its pollution rights to Factory B. b. Both firms have an incentive to buy pollution rights c. Factory B can profit from selling its pollution rights to Factory A. d. Both firms have an incentive to sell pollution rights.
The nominal exchange rate is 90 Pakistani rupees per dollar. The price of a shirt in Pakistan is 1800 rupees. The same shirt sells for $25 in the U.S. A. What is the real exchange rate? Show your work. B. Can arbitragers make a profit? C. If your answer to C is yes, where would they buy and where would they sell?