Diminishing Marginal Returns occur when increasing one unit of production, whilst holding other factors constant – results in lower levels of output. In other words, production starts to become less efficient.
Q. What is the change in output that results from having one more worker?
The change in output from adding one more worker is the marginal product of labor. At the beginning, adding each worker will result in increasing marginal returns. Workers will be able to specialize and gain skills. At some point, adding each worker will result in diminishing marginal returns.
Q. How is the total cost of factory or other production site determined?
The fixed costs and variable costs are calculated collectively to get the total cost of the product. Fixed cost is business costs, example an office rent. An office rent is fixed cost that must be paid in any case whether the number of goods produced or not.
Q. How much of a good is offered for sale at a specific price?
Chapter 5 – vocabulary practice
| A | B |
|---|---|
| The amount of a good offered at a specific price is the | quantity supplied |
| The __________ cost is the additional cost of producing one more unit | marginal |
| Costs that do not change are | fixed |
| Government may tax the sale or manufacture of a good with a(n) | excise tax |
Q. What is a cost that does not change no matter how much is produced?
economics ch 5
| Question | Answer |
|---|---|
| a cost that does not change, no matter how much of a good is produced | fixed cost |
| a cost that rises or falls depending on the quantity produced | variable cost |
| the sum of fixed costs plus variable costs | total cost |
| the cost of producing one more unit of a good | marginal cost |
