Question

(a) Calculate marginal costs, total costs, average fixed costs, average variable costs and average total costs, given the following table. Fixed costs are $100.

Output	Total Variable Cost	Marginal Cost	Total Cost	Average Fixed Cost	Average Variable Cost	Average Total cost
0	0
1	60
2	90
3	110
4	150
5	230
6	450
7	610
8	810

(b) Between what levels of output is there increasing marginal productivity?
(c) If labour were the only input to this production process, between what levels of output is the marginal product of labour falling?

Q#3. (7.5 marks) You have just spent two hours studying microeconomics and this has made you very hungry. You have $10 to spend on a snack and decide to go to Taco Bell. Putting your newly acquired economics knowledge to use, you have developed the following table to assist with your purchase decision:

                       

Double Decker Tacos (P = $1)				Chicken Burrito Supremes (P = $2)
Q	TU	MU	MU/P	Q	TU	MU	MU/P
0	0			0	0
1	20			1	28
2	34			2	46
3	44			3	54
4	48			4	56
5	48			5	56
6	42			6	52

(a) Fill in the missing values in the table above.

(b) If you bought 6 tacos and 2 burritos are you maximizing your utility? Explain.

(c) If your answer to part ‘b’ is ‘no’, what combination of tacos and burritos would maximize your utility? What is your maximum total utility?

Answer 1