Question

29.Metropolitan Museum completes round of layoffs

The museum cut 74 jobs and 95 other workers retired. The museum also laid off 127 other employees in its retail shops. The cut in labor costs is​ $10 million, but the museum expects no change in the number of visitors.

​Source: The New York Times​, June​ 22, 2009

Explain how the job cuts and shop closings will change the​ museum's short-run average cost curves and marginal cost curve.

  

A cut in labor but no change in output increases the marginal product of labor.

What is the effect on the marginal cost​ curve?

A.

A rightward movement along the marginal cost curve occurs.

B.

The marginal cost curve shifts upward.

C.

The marginal cost curve shifts downward.

D.

A leftward movement along the marginal cost curve occurs.

The average variable cost curve​ ______ and the average total cost curve​ ______.

A.

does not​ change; shifts downward

B.

shifts​ downward; does not change

C.

does not​ change; does not change

D.

shifts​ downward; shifts downward

E.

shifts​ downward; shifts upward

Answer 1

The MC curve will shift downward

option(C)

The AVC curve will shift downward and the ATC curve will shift downward

option(D)