Consider a firm's short-run cost curves.When capital is a fixed factor,a rise in the cost of labour
A)shifts the marginal cost curve upwards.
B)shifts the AVC curve down.
C)shifts the total product curve downwards.
D)leaves the MC curve unchanged.
E)leaves the ATC curve unchanged.

Question

Quizplus · Accepted Answer

In the short-run, when capital is fixed, an increase in the cost of labor will increase the variable cost of production, which will shift the marginal cost curve upwards. This is because as the cost of employing each additional unit of labor rises, the firm will have to pay more to produce each additional unit of output, resulting in higher marginal costs. The other options are not affected by a change in the cost of labor in the short-run with fixed capital.

Consider a Firm's Short-Run Cost Curves