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

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

Quizplus · Accepted Answer

This conclusion can be drawn from the information given in the question that Bobby pays all his workers the same wage, and labor is his only variable cost. The average variable cost (AVC) is the variable cost per unit of output. As output rises, the fixed costs are spread over a larger number of units, causing the average variable cost to initially decrease. However, after a certain level of output, the AVC starts increasing due to the law of diminishing returns. Therefore, the option that correctly describes this trend is that the AVC decreases as output rises from 0 to 26 but rises after that.

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