Economics: Principles, Problems, and Policies, 19th Edition

Published by McGraw-Hill Education
ISBN 10: 0073511447
ISBN 13: 978-0-07351-144-3

Chapter 7 - Businesses and the Costs of Production - Questions - Page 161: 8b

Answer

The average fixed cost curve would remain unchanged. The average variable cost curve will move upward uniformly. The total cost curve would move upward uniformly. The marginal cost curve would remained unchanged.

Work Step by Step

Since wages of production workers are variable costs, there are no changes in the fixed cost (ceteris paribus), the average fixed cost curve will remain unchanged. Wages of production workers are variable costs, as they can be changed in the short run, due to the usually short contracts of production workers. Thus, an increase of wages would see variable cost at every output level increasing uniformly. Thus, the average variable cost curve would move upward uniformly. The increase in the average total cost is due to the increase in the average variable cost (total cost is the addition of variable and fixed cost). Since the average variable cost curve decreases uniformly, the total cost curve would also move downward uniformly. Since the marginal cost curve is derived from the gradient of the total cost curve, and the total cost curve’s gradient remained unchanged (it merely moved downward), the marginal cost curve would remain unchanged as the gradient stays the same.
Update this answer!

You can help us out by revising, improving and updating this answer.

Update this answer

After you claim an answer you’ll have 24 hours to send in a draft. An editor will review the submission and either publish your submission or provide feedback.