Suppose Ralph has a chicken processing plant with the total cost function shown

Question

Suppose Ralph has a chicken processing plant with the total cost function shown in the accopmanying table uantity of Chickens 800 1,000 1,200 1,400 1,500 1600 1,800 2,000 2,400 What is Ralph's fixed cost? 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Ralph's fixed cost: S Ralph pays his workers $100 each, and labor is the only variable cost. At a quantity of 6000 chickens, how many workers does he hire? number of workers Ralph hires Why does total cost increase faster as output increases? There are increasing returns to scale O The variable cost increases O There are diminishing returns to labor O The fixed cost increases

Explanation / Answer

Solution-

Ralph's Fixed cost is $800.

Reason-

Fixed cost is the constant cost which is remains constant at all output level and At output level of 0 there is no variable cost incurred Hence, Fixed cost is $800.

No. of workers ralph hires is 10 workers.

Reason-

In given, Ralph pay $100 to his workers and variable cost is the only labour cost

Total cost is $1800

TC = FC + VC and fixed cost is $800 it means $1000 is variable cost

Hence, No. of workers = VC / Wage = 1000 / 100 = 10 workers.

Why does total cost increase faster as output increases There are diminishing returns to labour.

The correct option is C. There are diminishing returns to labour.

Reason-

Due to decreasing returns for large-scale production, deferred retail refinance is done by law. As a result, the total cost increases with increasing speed and the low-cost curve increases due to the diminishing returns laws.

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