Question

suppose that talias only variable cost is labor. assume that talia faces daily fixed costs of $20 and pays all workers the same daily wage of $30. use the orange points (square symbol) to plot talias total cost curve on the following graph using the quantities from the preceding table. true or false: the shape of the production function reflects the law of increasing marginal returns. true false

Explanation:

Step1: Recall total - cost formula

Total cost (TC) = Fixed cost (FC)+Variable cost (VC). Given FC = 20 and VC = 30×number of workers.

Step2: Find total cost for different levels of output

Let's assume we can find the number of workers corresponding to each level of output from the production - function graph. For example, when number of workers \(L = 0\), \(TC=20 + 30\times0=20\); when \(L = 1\), \(TC = 20+30\times1 = 50\); when \(L = 2\), \(TC=20 + 30\times2=80\); when \(L = 3\), \(TC=20+30\times3 = 110\); when \(L = 4\), \(TC=20+30\times4 = 140\); when \(L = 5\), \(TC=20+30\times5=170\).

Step3: Analyze the production - function shape

The law of increasing marginal returns implies that as more of a variable input (labor) is added, the marginal product of that input increases. However, looking at the production - function graph, the slope of the production function is increasing at a decreasing rate. This indicates the law of diminishing marginal returns.

Answer:

False