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3) Draw a set of short run average cost curves and marginal cost curves in which the marginal product of labor is diminishing.

3) Draw a set of short run average cost curves and marginal cost curves in which the marginal product of labor is diminishing.

Calculus: Early Transcendentals
Calculus: Early Transcendentals
8th Edition
ISBN:9781285741550
Author:James Stewart
Publisher:James Stewart
Chapter1: Functions And Models
Section: Chapter Questions
Problem 1RCC: (a) What is a function? What are its domain and range? (b) What is the graph of a function? (c) How...
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**Question 3: Cost Curves in Economics** **Task:** Draw a set of short-run average cost curves and marginal cost curves in which the marginal product of labor is diminishing. **Explanation:** In economics, cost curves are essential for understanding how production costs behave in the short run. When creating these curves, it's important to consider the relationship between labor input and output. - **Short-run Average Cost (SAC) Curves:** These curves show the average cost per unit of output at different production levels when at least one factor of production is fixed. - **Marginal Cost (MC) Curve:** This curve represents the cost of producing one additional unit of output. **Diminishing Marginal Product of Labor:** As more units of labor are added, the additional output produced by each extra unit of labor decreases. This results in increasing marginal costs, as each new unit of output becomes more costly to produce. In the graph: - The SAC typically looks U-shaped due to initially decreasing costs with increased efficiency, followed by rising costs as resources become fully utilized. - The MC curve usually intersects the SAC curve at its lowest point, illustrating the principle that when MC is below SAC, SAC decreases, and when MC is above SAC, SAC increases. Understanding these concepts helps in analyzing how companies minimize costs and maximize production efficiency.
Transcribed Image Text:**Question 3: Cost Curves in Economics** **Task:** Draw a set of short-run average cost curves and marginal cost curves in which the marginal product of labor is diminishing. **Explanation:** In economics, cost curves are essential for understanding how production costs behave in the short run. When creating these curves, it's important to consider the relationship between labor input and output. - **Short-run Average Cost (SAC) Curves:** These curves show the average cost per unit of output at different production levels when at least one factor of production is fixed. - **Marginal Cost (MC) Curve:** This curve represents the cost of producing one additional unit of output. **Diminishing Marginal Product of Labor:** As more units of labor are added, the additional output produced by each extra unit of labor decreases. This results in increasing marginal costs, as each new unit of output becomes more costly to produce. In the graph: - The SAC typically looks U-shaped due to initially decreasing costs with increased efficiency, followed by rising costs as resources become fully utilized. - The MC curve usually intersects the SAC curve at its lowest point, illustrating the principle that when MC is below SAC, SAC decreases, and when MC is above SAC, SAC increases. Understanding these concepts helps in analyzing how companies minimize costs and maximize production efficiency.
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