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A manufacturer of base units for home sensor protection (security, water, carbon monoxide,

Question

1. A manufacturer of base units for home sensor protection (security, water, carbon monoxide,

etc.) produces these units in a small facility in northern Indiana. The firm’s engineer has set up assembly cells in the facility that she believes will be the most efficient means of producing the units. The following table displays the various costs per hour for producing the units.

Explain why Marginal Costs initially decline but then increase with the sixth unit of production. Which short run production principle is at work here in creating this pattern of Marginal Costs?

Explanation must be in one paragraph long. Answer is clear and persistent.

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