QUESTION 7

1. The law of diminishing marginal returns states

that at some point, adding more of a fixed input to a given amount of variable inputs will cause the marginal product of the variable input to decline.

that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline.

that in the presence of a fixed factor, at some point average product of labor starts to fall as more and more variable inputs are added.

average total costs of production initially fall and after some point starts to rise at a decreasing rate as output increases.

QUESTION 8

1. If eleven workers can produce a total of 54 units of a product and a 12th worker has a marginal product of 6 units, then the average product of 12 workers is

60 units.

54 units.

48 units.

5 units.

QUESTION 9

1. Assume that one laborer produces 6 units of output, two laborers produce 14 units, three laborers produce 20 units, and four laborers produce 24 units. Diminishing returns set in when the firm hires

the first laborer

the second laborer

the third laborer

the 4th laborer

diminishing returns have not set in because total product is still increasing