Sia
Question
Microeconomics
Posted 9 months ago
When a firm's only variable input is labor, the average variable cost
Choose 1 answer:
A) falls when the average product of labor falls.
(B) is lowest when the average product of labor is highest.
(c) rises when the marginal product of labor rises.
(D) is lowest when the marginal product of labor is highest.
(E) rises when the average product of labor rises.
Sign in to unlock the answer
Answer from Sia
Posted 9 months ago
Solution
a
Definition of Average Variable Cost (AVC): The average variable cost (AVC) is the variable cost per unit of output, calculated as total variable cost divided by the quantity of output produced
b
Relationship with Average Product of Labor (APL): The average product of labor (APL) is the output per unit of labor. When APL is high, fewer labor units are needed to produce a given output, reducing the AVC
c
Relationship with Marginal Product of Labor (MPL): The marginal product of labor (MPL) is the additional output produced by an additional unit of labor. When MPL is high, the cost of producing an additional unit of output is lower, affecting the AVC
d
Lowest AVC and APL: The AVC is lowest when the APL is highest because the firm is using labor most efficiently, minimizing the variable cost per unit of output
Answer
B) is lowest when the average product of labor is highest.
Key Concept
Average Variable Cost (AVC) and Average Product of Labor (APL)
Explanation
The AVC is minimized when the APL is maximized because the firm is using labor most efficiently, resulting in the lowest variable cost per unit of output.
Not the question you are looking for? Ask here!
Enter question by text
Enter question by image
Unlock Smarter Learning with AskSia Super!
Join Super, our all-in-one AI solution that can greatly improve your learning efficiency.
30% higher accuracy than GPT-4o
Entire learning journey support
The most student-friendly features
Study Other Question