Scenario 12-17
Suppose that a given firm experiences decreasing marginal product of labor with the addition of each worker regardless of the current output level.
-Refer to Scenario 12-17.Average total cost will be
A) rising at all points.
B) falling at all points.
C) constant.
D) U-shaped.

Question

Quizplus · Accepted Answer

The average total cost curve is typically U-shaped because initially, as more workers are added, the firm benefits from increasing returns to scale, which lowers average costs. However, as the marginal product of labor decreases, the average total cost eventually starts to rise.

Scenario 12-17 Suppose That a Given Firm Experiences Decreasing Marginal Product of Product