Question

2. The following table show the relationship between labor and output for a firm that is...

2. The following table show the relationship between labor and output for a firm that is using 100 units of capital (K).

L 40 41 42 43 44

Q 1,000 1,018 1,035 1,051 1,066

a) Calculate the MPL and APL for labor units 41 through 44.

b) The cost of one unit of K is $45 (r = 45) and the cost of one unit of labor is $30 (w = 30). Use these figures, the amount of capital you have, and your MPL and APL to calculate the firm’s Average Fixed Cost, Average Variable Cost, Average Total Cost, and Marginal Cost for the last four values for Q. Put all this information in a table.

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Homework Answers

Answer #1

APL = Q/L

MPL = ∆Q/∆L

TC = (price of labor)(number of units of labor) + (price of capital)(number of units of capital)

VC = (price of labor)(number of units of labor)

FC = (price of capital)(number of units of capital)

AFC = FC/Q

ATC = TC/Q

AVC = VC/Q

MC = ∆TC/∆Q

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