Chapter%205%20Section%202

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Chapter 5Section 2
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• A Basic Question owners have to answer is how
  many workers to hire.
• To answer this question owners have to consider
  how the number of workers they hire will affect
  their production.

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• An example is workers at a bean bag factory. One
  worker can produce four bean bags per hour, but
  two can produce ten.
• As new workers join a factory, total output
  increases.

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• Marginal product of labor-The change in output
  from hiring one more worker.
• Increasing marginal returns- specialization
  increases output per worker, so the second worker
  adds more to the output than the first.

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• Diminishing marginal returns- Adding more workers
  increases total output , but at a decreasing
  rate.

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• Fixed cost- A cost that does not change, no
  matter how much of a good is produced.

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• Variable cost- Costs that rise or fall depending
  on the quantity produced.
• Total cost- Fixed costs and variable costs are
  added together.
• Marginal cost- The additional cost of producing
  one more unit.

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• Marginal revenue- the additional money made by
  selling one more item.
• Operating cost- The cost of operating a facility.

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• The ideal level of output is where marginal
  revenue is equal to marginal cost.
• If a firm has no control over the market price,
  marginal revenue equals the market price.

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• In a market economy specialization increases
  output per worker.
• A firm with diminishing marginal returns of labor
  will produce less and less output from each
  additional unit of labor added to the mix.

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• Firms suffer from diminishing marginal returns
  from labor because its workers must work with a
  limited amount of capital.

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How does the Marginal Product of Labor change as
more workers are hired?
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What is the impact of Diminishing Marginal
Returns to labor?
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What is an example of a Fixed Cost and a
Variable Cost?
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How does a firm calculate Marginal Cost?
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What would happen if the price of a bean bag
suddenly rose from 24.00 to 37.00?
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Behind all the decisions about how many
workers to hire, what is the firms basic goal?
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What is a Marginal Cost?
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What do variable cost include?
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Why does the firm suffer from diminishing
marginal returns from labor?
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What is one of the basic questions any business
owner has to answer?