Consider the following information about baseball production at Bobby's Baseball Factory: Bobby pays all his workers the same wage,and labor is his only variable cost.From this information we can conclude that Bobby's average variable cost decreases
A) as output rises from 0 to 10,but rises after that.
B) as output rises from 0 to 26,but rises after that.
C) as output rises from 0 to 33,but increases after that.
D) continually as output rises.

Question

Consider the following information about baseball production at Bobby's Baseball Factory:  Bobby pays all his workers the same wage,and labor is his only variable cost.From this information we can conclude that Bobby's average variable cost decreases
A) as output rises from 0 to 10,but rises after that. 
B) as output rises from 0 to 26,but rises after that. 
C) as output rises from 0 to 33,but increases after that. 
D) continually as output rises.

Quizplus · Accepted Answer

The information provided suggests that Bobby's only variable cost is labor, and all workers are paid the same wage. Therefore, as output increases, the average variable cost should decrease initially due to economies of scale. However, at some point, the marginal product of labor may decrease, causing the average variable cost to increase. Looking at the table, we see that the average variable cost decreases from $11.00 to $4.92 as output rises from 0 to 26, but then increases to $6.69 as output rises to 31. Therefore, the best choice is B.

Consider the Following Information About Baseball Production at Bobby's Baseball