Question

6. At Samantha’s Soccer House, the total cost of producing 200 premium grade soccer balls is $10,800. Fixed costs are equal to $3,200 and the variable cost of producing 210 soccer balls is $8,190. The marginal cost of the 205th soccer ball is
A. $39.
B. $49.
C. $59.
D. more than $59
E. None of the above

7. Which of the following statements is (are) correct about the short-run?
(x) Marginal cost falls when marginal product is falling.
(y) A firm is necessarily experiencing diminishing marginal product if the marginal cost curve slopes upward
(z) If the marginal cost curve is U-shaped it is because of the presence of increasing marginal product followed by diminish marginal product.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

Answer 1

6. Total cost of producing 200 soccer balls is $10,800 and the fixed costs are equal to $3,200 which implies that the variable cost of 200 soccer balls is 10800 - 3200 = $7600. Now the variable cost of producing 210 soccer balls is $8,190. This suggests that the marginal cost of every soccer ball from 200 to 210 is (8190 - 7600)/(210 - 200) = $59. The marginal cost of the 205th soccer ball is $59. Select option C

7. D. (y) and (z) only. MC is U shaped and MP is inverse U shaped. This implies that when MC is increasing (increasing costs) MP is falling (diminishing returns or diminishing MP). Also MC is falling (decreasing costs) when MP is rising (increasing returns).