If two firms are identical in all respects except that one has more of the fixed input capital than another,the marginal product curve for the firm with more capital:
A)must equal the marginal product curve for the firm with less capital.
B)will lie above the marginal product curve for the firm with less capital.
C)will lie below the total marginal curve for the firm with less capital.
D)will show no diminishing marginal returns.

Question

Quizplus · Accepted Answer

When a firm has more fixed input capital, the marginal product curve will lie above the marginal product curve for the firm with less capital. This is because the firm with more capital is able to produce more output using the same variable input due to economies of scale. As a result, the marginal product of the variable input will be higher for the firm with more capital, and its marginal product curve will lie above the curve for the firm with less capital.

If Two Firms Are Identical in All Respects Except That