When a firm's only variable input is labor, the average variable cost $(A V C):$

Choose 1 answer:
(A) rises when the marginal product of labor rises.
(B) falls when the average product of labor falls.
(C) is lowest when the marginal product of labor is highest.
(D) is lowest when the average product of labor is highest.
(E) rises when the average product of labor rises.

Question

When a firm's only variable input is labor, the average variable cost $(A V C):$

Choose 1 answer:
(A) rises when the marginal product of labor rises.
(B) falls when the average product of labor falls.
(C) is lowest when the marginal product of labor is highest.
(D) is lowest when the average product of labor is highest.
(E) rises when the average product of labor rises.

Accepted Answer

∻Solution∻ ‖ a ⋮ Relationship between AVC and MPL: The average variable cost (AVC) is inversely related to the marginal product of labor (MPL). When MPL rises, it means that each additional unit of labor is producing more output, which lowers the AVC. ‖ ‖ b ⋮ Relationship between AVC and APL: Similarly, the average variable cost is inversely related to the average product of labor (APL). When APL is highest, it means labor is being used most efficiently, which minimizes AVC. ‖ ∻Answer∻ ⚹ (D) is lowest when the average product of labor is highest. ⚹ ∻Key Concept∻ ⚹ Inverse Relationship between AVC and APL ⚹ ∻Explanation∻ ⚹ The average variable cost is at its lowest when the average product of labor is at its highest because labor efficiency is maximized, reducing the cost per unit of output. ⚹◊What is the relationship between average variable cost and the marginal product of labor in the short run?⍭ Generate me a similar question◊

Sia