a other things being equal, when marginal productivity rises: average fixed cost

Question

a other things being equal, when marginal productivity rises: average fixed cost must rise. A. B. marginal cost must fall. C. average variable cost must rise. D. total cost must fall. 11. If the marginal revenue of the next widget a firm produces is $100 and its marginal cost is S110, a firm should: A. reconsider past production decisions. B. decrease production. C. increase production. D. hold production constant. 12. A perfectly competitive firm facing a price of $1 4 decides to produce 100 widgets. If its marginal cost of producing the last widget is $12 and it is seeking to maximize profit, the firm should A. produce more widgets. B. produce fewer widgets C. continue producing 100 widgets. D. shut down.

Explanation / Answer

10. C
The increase in productivity increases output, keeping the amount of input factors constant. Hence, the total cost is the same but the quantity is higher.
Since average fixed cost is a constant divided by the quantity produced, increase in quantity decreases Aveeage fixed cost. Thus, to keep Total costs equal, it must be the case that the Aveeage variable cost increases.

11. B

Since MC is higher than the MR, it should decrease production until they equalize

12. A
Since P>MC, the firm should produce more than 100 till the point that P and MC equalize.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

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