Problem 1: If a company's only variable input is labor and 50 workers are used, the average product of labor is 50, the marginal product of labor is 75, the wage rate is $80 and the total cost of fixed input is $500, which is true?
- Average variable cost is rising
- marginal cost is rising
- average variable is lowering
- you can not figure without more information
Problem 2: Let say a company is currently using 50 workers, has 30 sewing machines to produce 5000 shirts a day, the wage rate is $200 and the rental rate of the sewing machines is $1000. At these input levels another employee adds 200 shirts, while another sewing machine adds 500 shirts. If the company uses 35 sewers and 31 sewing machines instead, then what will happen?
- Costs be unchanged & output decreases by 500 units
- Costs be unchanged & output increases by 300 units
- Costs be unchanged & output increases by 500 units
- Output will be unchanged and costs will decrease by $800
- none of these
Problem 3: When "economies of mass production exist does long-run average cost decrease as output increases or is it total cost decreases as output increases? Please explain.