This Graph Shows the Cost Curves for Moe's Mushroom Gathering

question 68

Multiple Choice

This graph shows the cost curves for Moe's mushroom gathering business, which is perfectly competitive. The curve labeled A is upward sloping because:

• A)of high fixed costs.
• B)of diminishing returns to Moe's variable factors of production.
• C)an increase in the demand for mushrooms increases the supply of mushrooms.
• D)variable costs increase as output increases.

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Definitions:

Marginal Product

It is the increase in output that results from a one-unit increase in the input, keeping all other inputs constant.

Average Product

The output per unit of a particular input, such as labor or capital, calculated by dividing total product by the quantity of input.

Average Product

The output produced per unit of input used, typically calculated by dividing total product by the quantity of input.

Marginal Product

The additional output gained by employing one more unit of a particular input, keeping other inputs constant.