Question

a)     Draw a production function that exhibits diminishing marginal product of labor. Define total cost, average total cost, and marginal cost. How are they related?

Answer 1

Production function with diminishing marginal product of labour

Total cost is the overall sum of production cost comprising of both explicit and implicit cost spent to produce a certain level of output. 

Average total cost is the total expenditure incurred over the total quantity produced. 

Marginal cost is the change in total cost incurred  when output increases by a single unit.

How they are related

AC = $\frac{TC}{Q}$ ; TC = AC× Q

$MC =\frac{ \Delta TC}{\Delta Q}$