89

Refer to the diagram, where variable inputs of labor are being added to a constant amount of property resources. Marginal cost will be at a minimum for this firm when it is hiring

A. Q3 workers.
B. Q2 workers.
C. Q1 workers.
D. more than Q3 workers.

Question

89

Refer to the diagram, where variable inputs of labor are being added to a constant amount of property resources. Marginal cost will be at a minimum for this firm when it is hiring

A. Q3 workers.
B. Q2 workers.
C. Q1 workers.
D. more than Q3 workers.

BlackTom AI · Accepted Answer

First, let’s unpack what the diagram is conveying. In production theory, marginal cost (MC) is the cost of producing one more unit of output, and it is inversely related to marginal product (MP): when MP is high, MC is low, and when MP is low, MC is high. In this graph, the MP curve is the steeper, upper curve labeled Marginal Product, which rises to a peak and then falls as more labor is added. The MC minimum occurs at the point where MP is at its maximum, because adding the next unit of labor yields the greatest additional output per unit of cost.

Option A: Q3 workers. Here, the MP curve has declined significantly from its peak, so the additional output from each extra worker is smaller. This implies a higher marginal cost than at the MP peak. Therefore, MC is not minimized here.

Option B: Q2 workers. While MP is still positive and contributes to lower MC than at Q3, it is not at its maximum. Since MC is tied to the inverse of MP, the MC would be higher than at the MP peak.

Option C: Q1 workers. This is the region where the Marginal Product curve reaches its maximum. When MP is maximized, each additional worker adds the most to total output per unit of input, driving MC to its lowest level on the margin. This aligns with the standard MP–MC relationship.

Option D: more than Q3 workers. Beyond Q3, MP has fallen further (and could even become negative if the diagram extended that far), which would push MC higher, not lower. Thus MC would not be minimized here.

Put together, the reasoning shows that the marginal cost is minimized at the point where marginal product is at its maximum, which occurs at the Q1 level of labor inputs. The option that corresponds to that level is the one describing Q1 workers.

89 Refer to the diagram, where variable inputs of labor are being added to a constant amount of property resources. Marginal cost will be at a minimum for this firm when it is hiring A. Q3 workers. B. Q2 workers. C. Q1 workers. D. more than Q3 workers.

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