Question

Consider the following statements when answering this​ question: I. If a firm employs only one variable factor of​ production, labor, and the marginal product of labor is​ constant, then the marginal costs of production are constant too. II. If a firm employs only one variable factor of​ production, labor, and the marginal product of labor is​ constant, then ​ short-run average total costs cannot rise as output rises. A. I is​ true, and II is false. B. I is​ false, and II is true. C. I and II are both true. D. I and II are both false.

Answer 1

Answer:

C. I and II are both true.

Explanation:

Statement 1 states that if there is only one variable factor let us assume that is labor, accordingly it changes in total when there is change in output level, but that the change in per unit cost is NIL in variable terms and marginal terms.

Thus, this will result in constant marginal cost.

Statement 2 states that with all things similar to statement 1 the short run average total cost shall not increase, this is also correct as since the marginal product is constant, the average cost tends to decrease and cannot rise in any manner, even with the increase in output until the marginal cost increases.