Question

Other things being equal, which of the following could decrease the average cost of
producing automobiles in the United States?
A. An increase in wages paid to automobile workers.
B. A decrease in the average product of automobile workers.
C. An increase in the price of steel.
D. An increase in the price of automobiles.
E. An increase in the average product of automobile workers.

The law of diminishing marginal returns implies that
A. the marginal product of labor in a factory will increase continually as more workers
are hired in the short run.
B. the average product of labor in a factory will increase at first and then decrease in
the short run as more workers are hired.
C. the average product of labor will continually increase in a factory in the short run as
more workers are hired.
D. the average cost of production will increase at first and then decrease in a factory in
the short run as more is produced per day.

Number of workers
Per week
Output
(Yards of fabric per week)
1 20
2 30
3 37
4 42
5 45
6 47

If the factory is currently employing 4 workers, then which of the following is true?
A. The marginal product of a fifth worker is 3 yards of fabric per week.
B. The marginal product of a fifth worker is 9 yards of fabric per week.
C. The marginal product of a fifth worker is zero.
D. The average product of labor would be 3 yards of fabric when a fifth worker is hired.

If the factory employs 5 workers then which of the following statements is true?
A. The average product of workers is 9 yards of fabric per week.
B. The average product of workers is 15 yards of fabric per week.
C. The marginal product of workers is 9 yards of fabric per week.
D. The marginal product of workers is zero.

Answer 1

E. An increase in the average product of automobile workers.

Due to increase in average product of automobile workers, efficiency is increased as now each worker will produce more at same cost. It means cost per output will decrease.

D. the average cost of production will increase at first and then decrease in a factory in
the short run as more is produced per day.

This is also known as law of variable proportion. The law of variable proportions states that as the quantity of one factor is increased, keeping the other factors fixed, the marginal product of that factor will eventually decline.

A. The marginal product of a fifth worker is 3 yards of fabric per week.

Marginal Product = Change in Output/Change in worker

At 5th worker, marginal product = 45 - 42 = 3 yards

A. The average product of workers is 9 yards of fabric per week.

Average Product = Output/No. of workers

Average product at 5th worker = 45/5 = 9 yards