True, False, or Uncertain [6 marks] Explain why each of the following statements

Question

True, False, or Uncertain [6 marks]

Explain why each of the following statements is True,, False, or Uncertain according to economic principles. Use diagrams where appropriate. Unsupported answers will receive no marks. It is the explanation that is important.

Q: Suppose a firm faces a wage of 100/unit of labour and at its current hiring level, marginal product (MP) is equal to 10. If a technological advance increases MP to 20, the marginal cost of output produced by this level of labour will decline from 10 to 5. [Hint: MC across multiple units of output is the change in total costs divided by the change in output]

Explanation / Answer

Uncertain. Depends on the type of production function. If the production function has CRS that is constant returns to scale then only will the MC be halved.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.