Consider a Basket-Producing Firm with Fixed Capital

question 143

Multiple Choice

Consider a basket-producing firm with fixed capital.If the firm can produce 24 baskets per day with 3 workers and then increases production to 36 baskets per day with 4 workers,then which of the following statements is definitely true?

• A)The firm has passed the point of diminishing marginal productivity.
• B)The marginal productivity of the fourth worker is 9.
• C)The firm has passed the point of diminishing average productivity.
• D)With 4 workers,the average product is greater than the marginal product.
• E)With 4 workers,the marginal product is greater than the average product.

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Definitions:

Rational Decisions

Choices made by individuals that align with their own self-interest and are based on an evaluation of the costs and benefits of the action.

Marginal Costs

The extra financial burden of generating one additional unit of a good or service.

Marginal Benefits

The incremental satisfaction or advantage obtained from the consumption of an additional unit of a good or service.

Marginal Cost

Marginal cost is the increase in total production cost that arises from producing one additional unit of a good or service.