Assume Fixed Costs Are 470 and Labor Costs $20 Per

question 70

Multiple Choice

Assume fixed costs are 470 and labor costs $20 per unit. The first laborer produces 20 units of output. Subsequent hires add 5 units less to production than the previous worker. Thus the second worker adds 15, the third adds 10 etc. If the fifth laborer adds 25 units to the short run production output and the sixth laborer adds 20 units to the total output and the firm can hire all the labor it wants at the going wage we can be sure that

• A)marginal cost is increasing.
• B)average total cost is increasing.
• C)average variable cost is increasing.
• D)None of these is correct because all the costs listed are decreasing.

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Definitions:

J. Stacy Adams

A psychologist known for developing the Equity Theory of motivation that explains how individuals perceive fairness in distribution of resources.

Motivating State

A psychological condition or environment that encourages individuals to act in a particular way or pursue a specific goal.

Equity Theory

A theory in social psychology that explains how individuals perceive the fairness of their input-to-output ratios in comparison to others, affecting their motivation and satisfaction.

Feelings of Inequity

Feelings of inequity occur when individuals perceive that they are not being treated fairly in comparison to others, which can affect motivation and satisfaction.