If the Price of Labor Is Constant and a Firm

question 321

Multiple Choice

If the price of labor is constant and a firm experiences diminishing marginal product, then its

• A) marginal costs increase.
• B) marginal costs decrease.
• C) fixed costs increase.
• D) total costs decrease.

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs, indicating the amount available to cover fixed costs and generate profit.

Variable Administrative Expenses

Expenses within the administration sector that fluctuate with the level of business activity, like sales commissions.

Contribution Margin

The amount by which a product's sales price exceeds its variable costs, used to cover fixed costs and generate profit.

Variable Selling Expenses

Costs that fluctuate with the level of sales activity, such as commissions and shipping fees.