Question
Use the following production function to answer the questions below where labor (L) is measured in...
- Use the following production function to answer the questions below where labor (L) is measured in workers per day and output (Q) is number of units per day. Compute marginal physical product (MPP), marginal cost (MC), and average total cost (ATC)
|
L |
Q |
MPP |
TVC |
TC |
MC |
ATC |
|
0 |
0 |
$0 |
$12 |
|||
|
1 |
8 |
8 |
20 |
|||
|
2 |
20 |
16 |
28 |
|||
|
3 |
28 |
24 |
36 |
|||
|
4 |
32 |
32 |
44 |
|||
|
5 |
34 |
40 |
52 |
Suppose a firm had two sewing machines and could vary only the amount of labor input.
a. What amount of labor is associated with the point of diminishing returns?
b. What is the amount of this firm’s fixed costs?
c. What is the wage rate?
d. Graph Marginal Cost and Average Total Cost.
Homework Answers
Answer #1
A. When Labor is 2 units then MPP is 12. After 2 nd unit of labor the Marginal Physical Product start declining.
B. Fixed Cost = $ 12
C. Wage rate = Variable Cost = $ 8
D. Refer the attached picture below. The blue curve is MC and orange curve is of ATC. The horizontal axis is number of labor.
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