Section+5.2

Basic question business owners have to answer is how many people to hire Marginal product of labor: the change in output from hiring one additional unit of labor Increasing marginal returns: a level of production in which the marginal product of labor increases as the number of workers increases Diminishing Marginal returns: a level of production in which the marginal product of labor decreases as the number of workers increases. Adding a lot of workers can not just help the output it can also decrease the output Fixed Cost: a cost that does not change, no matter how much of a good is produced Variable Cost: a cost that rises or falls depending on how much is produced Total Cost: Fixed costs plus variable costs Marginal Cost: The cost of producing one more unit of good Marginal Revenue: The additional income from selling one more unit of a good; sometimes equal to price Operating Cost: the cost of operating a facility, such as a store or factory

1.)How does marginal product of labor change as more workers are hired? It changes the output 2.)What is the impact of diminishing marginal returns labor? The company will produce less and less for each person hired 3.)Give an example of a fixed cost and a variable cost of a bakery. An example of a fixed cost is rent and an example of a variable cost is the electricity bill 4.)How does a firm calculate marginal cost? They keep track of the fixed and variable costs 5.)A firm had two companies, on twice as large as the second. As the number of workers at each factory increases, which factory will experience diminishing returns first? The one that has twice the amount of workers because with that many people working together would be difficult 6.)Explain whether each of these expenses of a textile mill is a fixed cost or a variable cast, and why. a.)repairs to a leaking roof: Fixed b.)cotton: variable c.)food for the mill's cafeteria: variable d.)night security guard: fixed e.)electricity: variable