Question

1. You are given the following data for a dental clinic. Daily fixed costs are $2000 For simplicity, assume that there is only one variable input (dentists). Dentists receive $1000 per day they work.

Assume output is as follows;

Number of dentists	0	1	2	3	4
Quantity of services (per day)	0	8	15	21	25

1. Draw the total product curve
2. Calculate the marginal product of dentists over the range provided.
3. Calculate the average product schedule of dentists
4. Calculate the marginal cost of adding another dentist over the range
5. Calculate the average total cost schedule
6. Calculate the average variable cost schedule

2. Let’s keep with the dental theme, but with a different problem.   Assume that the marginal product of a dentist is 8 per day and the marginal product of a dental hygienist is 5 per day. Dentists receive $700 in wages and hygienists receive $175. If you were adding one more input, which would be more economically efficient? Why?
3. Draw “typical” short-run average total costs and marginal costs curves. Be sure to get the relationships correct.

Answer 1

Number of dentists	Quantity of services	MP	AP	TFC	TVC	TC	MC	ATC	AVC
0	0	0		2000	0	2000
1	8	8	1	2000	1000	3000	125	375	125
2	15	7	0.466667	2000	2000	4000	142.8571	266.6667	133.3333
3	21	6	0.285714	2000	3000	5000	166.6667	238.0952	142.8571
4	25	4	0.16	2000	4000	6000	250	240	160

MP=change in TP

AP=TP/Labor

FC=2000

VC=1000*Number of dentist

TC=FC+VC

MC=change in TC/change in output

ATC=TC/Q

AVC=VC/Q