-1
$\begingroup$

Suppose that a firm has a Fixed cost of 10,000 dollars and Total Cost of 10,500 dollars for one unit and 11,100 dollars for two units of output. Which of the following is true for the Marginal Cost (MC) and Marginal Product (MP) of the second unit of output?

a) Marginal Cost is $500 and Marginal Product is decreasing

b) Marginal Cost is $500 and Marginal Product is increasing

c) Marginal Cost is $600 and Marginal Product is decreasing

d) Marginal Cost is $600 and Marginal Product is increasing

e) Marginal Cost is $1100 and Marginal Product is decreasing

f) Marginal Cost is $1100 and Marginal Product is increasing

g) none of the above

The answer is c which I don't quite get. It's true that Marginal cost is $600, but since average cost is decreasing, we know the average product is increasing and thus marginal product may or may not decrease. Could someone help?

$\endgroup$

closed as off-topic by Giskard, DornerA, cc7768, Martin Van der Linden, BKay Apr 8 '16 at 14:54

This question appears to be off-topic. The users who voted to close gave this specific reason:

  • "This question does not meet the standards for homework questions as spelled out in the relevant meta posts. For more information, see our policy on homework question and the general FAQ." – Giskard, DornerA, cc7768, Martin Van der Linden, BKay

2
$\begingroup$

MP = Change in output / Change in input For the first product MP1 = 1 / 500 For the second MP2 = 1 / 600 Hence, the MP is decreasing.

Hope this helps.

$\endgroup$

Not the answer you're looking for? Browse other questions tagged or ask your own question.