Question

1. T/F: companies should use average cost to determine how much product they should produce?
2. A company wants to expand production. It currently has 20 workers who share eight copiers. Two months ago, the firm added tow copiers, and output increased by 100,000 pages per day. One month ago, they added five workers, and productivity increased by 50,000 pages per day. Copiers cost about twice as much as workers. Would you recommend they hire another employee or by another copier?
3. If a firm’s average cost is rising, then: a.)Marginal cost is less than average cost b.) Marginal cost is rising c.)Marginal cost is greater than average cost d.)The firm is making an economic profit
4. A retailer has to pay $9 per hour to hire 13 workers. If the retailer only needs to hire 12 workers, a wage rate of $7 per hour is sufficient. What is the marginal cost of the 13^th worker? a:) $117 b.)$9 c.)$33 d.)$84
5. A firm is thinking of hiring an additional worker to their organization who can increase total productivity by 100 units a week. The cost of hiring him is $1,500 per week. If the price of each unit is $12..   a.)The marginal revenue of hiring the worker is $1,500 b.)The marginal cost of hiring the worker is $1,200 c.)The firm should not hire the worker since MB < MC d.)All of the above

Answer 1

Part A

The average cost is the cost per output. Lowering the per-unit cost and charge the same will increase the revenue of the firm and this increase in profits would never hurt customers with higher cost.

Part B

Here,

Number of copier added

The increase of production from 2 copier pages per day

Marginal product

Increase in workers

Increase in production from 5 workers

Marginal product

cost of copier

Suppose cost of worker =1 then cost of copier = 2

Marginal product per copier = pages per day

Marginal product for workers is 10,000 pages per day

So the firm should buy more copier than worker

Part C

Marginal cost is greater than average cost

Part D

Total cost to hire 13 workers,

Total cost of hire 12 workers,

Marginal cost to hire 13th worker is,

Part E

The firm should not hire the worker since MB<MC