Ch. 13 Study Guide WorkersQMPLCost of Factory Cost of Workers TC 00250 166 530 2115251035 3154251540 4183252045 520225 50 B. Plot the Production Function.

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Ch. 13 Study Guide WorkersQMPLCost of Factory Cost of Workers TC B. Plot the Production Function D. and TC curve

2c. What happens to the MPL as more workers are added to the production facility? Why? Use this information about the MPL to explain the slope of the production function. MPL decreases as more workers are added Each worker has to share fixed inputs As input increases, Q increases but at a slower rate and the slope of production function gets flatter

2e. Explain the shape of the TC curve As Q increases, and DMP sets in, the TC gets steeper. In order to produce more Q, the firm must employ greater amounts of input and costs rise at an increasing rate.

QFCVCTCAFCAVCATCMC b. Plot AFC, AVC, ATC, and MC

3c Explain the shape of curves in 2b AFC- FC divided by increasing Q so always falling AVC, ATC, MC : all fall and then rise because of increasing MP followed by decreasing MP ATC: high at low levels of Q b/c of FC is spread over only a few units; will drop as Q increases; ATC rises because even as AFC falls, AVC rises substantially

3d. Explain relationship between ATC and MC When MC < ATC, ATC falling When MC > ATC, ATC rising MC crosses ATC at min of ATC = Efficient Scale 3e. Explain ATC, AFC, AVC ATC = AFC + AVC Distance between ATC and AVC = AFC; and that distance is always getting smaller

3f What is Bob’s efficient scale? How to find? QFCVCTCAFCAVCATCMC