5. The law of diminishing returns states that the marginal physical product of a factor will: (a) Become negative as output increases. Always decline as output increases. Increase and then decline as output increases. Begin to decline as more of the factor is used. 6. 21.2? At what amount of labor input does the law of diminishing returns first become apparent in Figure (a) 0-1. 6) 1-2. (c) 2-3. (d) 3-4. 7. In Figure 21.1 at 4 units of labor, total output: (a) Is rising with increased labor usage. b) Is falling with increased labor usage. (c) Remains constant with increased labor. 8. T F When marginal physical product declines, total output declines. Exercise 2 This exercise shows the relationship between the various costs of production. 1. Complete Table 21.3 using the information given about output and the costs of production. (Hint: Refer to the table in Figure 21.5 in the text if you need help getting started.) Table 21.3 Costs of Production Rate of Output Fixed Cost Variable Cost Total Cost Average Total Marginal Cost Cost $ $ 20 SS 5 17 33 OUTAWN - O 75 89 149 2. When the average total cost is rising, marginal cost is (above; below; equal to) average total cost. 3. When the average total cost is falling, marginal cost is (above; below; equal to) average total cost. t's older Exercise 3 This exercise shows the relationship between fixed costs, variable costs, accounting cost, and economic cost. 1. Fixed costs are defined as: (a) Costs that do not change with inflation. (b) Costs that are set firmly (without escalator clauses) in a contract. (c) Costs of production that do not change when the rate of production is altered. (d) Average costs that do not change when the rate of production is altered