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1. True or False, and explain briefly. 1) If marginal product is greater than average product,...

1. True or False, and explain briefly.
1) If marginal product is greater than average product, total product must be
increasing.
2) You decide to purchase a new car for $12,000. Upon driving the car off of the
lot, the resale value of the car falls to $9,000. The opportunity cost of using
the car is $12,000.

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Answer #1

Answer 1) True, when marginal product is greater than average product i.e when we increase an additional unit of labor there will be an increase in total product , it also states that we are in first stage where Total Product is increasing.

Answer 2) False, Opportunity cost of the car is $12000-$9000 = $ 3000 because it is the cost for the next best alternative forgone. We could have invested this amount somewhere else.

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