Question

LeBron Factory

Number of Workers	Number of Machines	Output (chairs produced per hour)	Marginal Product of Labor	Cost of Workers	Cost of Machines	Total Cost
?1	?2	?5
?2	?2	?10
?3	?2	?20
?4	?2	?35
?5	?2	?55
?6	?2	?70
?7	?2	?80

Refer to Table above. First, complete the missing information in the Table above.  

1.Each worker at the LeBron Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. If the factory produces at a rate of 70 chairs per hour and operates 8 hours per day, what is the factory’s total labor cost per day?

a.	$72
b.	$112
c.	$576
d.	$616

2.Each worker at the LBJ Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. What is the total daily cost of producing at a rate of 55 chairs per hour if the factory operates 8 hours per day?

a.	$480
b.	$576
c.	$520
d.	$616

3.Each worker at the LBJ Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. Assume the number of machines does not change. If the factory produces at a rate of 78 chairs per hour, what is the total machine cost per day?

a.	$20
b.	$40
c.	$240
d.	We are unable to determine total machine costs from the information given.

4.Each worker at the LBJ Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. If the factory produces at a rate of 35 chairs per hour, what is the total labor cost per hour?

a.	$40
b.	$48
c.	$384
d.	$424

5.Assume LBJ Chair Factory currently employs 5 workers. What is the marginal product of labor when the factory adds a 6th worker?

a.	5 chairs per hour
b.	15 chairs per hour
c.	25 chairs per hour
d.	70 chairs per hour

6.Assume LBJ Chair Factory currently employs 2 workers. What is the marginal product of labor when the factory adds a 3rd worker?

a.		5 chairs per hour
b.		10 chairs per hour
c.		20 chairs per hour
d.		25 chairs per hour

7.Chair Factory experiences diminishing marginal product of labor with the addition of which worker?

a.	the third worker
b.	the fourth worker
c.	the fifth worker
d.	the sixth worker

Chico Samu Ocean and Fifi, the most popular couple in CU have a small company that has a subcontract to produce instructional materials for disabled children in public school districts. The owner rents several small rooms in an office building in the suburbs for $600 a month and has leased computer equipment that costs $480 a month.

First, complete the missing information in the table below.   

Output (Instructional Modules per Month)	Fixed Costs	Variable Costs	Total Cost	Average Fixed Cost	Average Variable Cost	Average Total Cost	Marginal Cost
0	$1,080
1	$1,080	$ 400	$1,480				$400
2						$965	$450
3		$1,350	$2,430
4		$1,900			$475
5		$2,500		$216
6			$4,280				$700
7		$4,100
8		$5,400		$135
9		$7,300
10			$10,880		$980

8.What is the marginal cost of creating the tenth instructional module in a given month?

a.	$900
b.	$1,250
c.	$2,500
d.	$3,060

9. What is the average variable cost for the month if 6 instructional modules are produced?

a.	$180.00
b.	$533.33
c.	$700.00
d.	$713.33

10.What is the average fixed cost for the month if 9 instructional modules are produced?

a.	$108.00
b.	$120.00
c.	$150.00
d.	$811.11

11.How many instructional modules are produced when marginal cost is $1,300?

a.	4
b.	5
c.	7
d.	8

12.One month, Teacher's Helper produced 18 instructional modules. What was the average fixed cost for that month?

a.	$60
b.	$108
c.	$811
d.	It can't be determined from the information given.

Figure 1 below

In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive market, and panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms.

      

13. If there are 500 identical firms in this market, what is the value of Q1?

a.	10,000
b.	20,000
c.	50,000
d.	150,000

14.If there are 500 identical firms in this market, what is the value of Q2?

a.	12,000
b.	60,000
c.	240,000
d.	300,000

15.If there are 700 identical firms in this market, what is the value of Q1?

a.	140,000
b.	210,000
c.	280,000
d.	420,000

16.If there are 700 identical firms in this market, what is the value of Q2?

a.	140,000
b.	210,000
c.	280,000
d.	420,000

17.A firm will shut down in the short run if the total revenue that it would get from producing and selling its output is less than its

a.	opportunity costs.
b.	fixed costs.
c.	variable costs.
d.	total costs.

18.A firm will shut down in the short run if, for all positive levels of output,

a.	its losses exceed its fixed costs.
b.	its total revenue is less than its variable costs.
c.	the price of its product is less than its average variable cost.
d.	All of the above are correct.

19.A firm's marginal cost has a minimum value of $2, its average variable cost has a minimum value of $4, and its average total cost has a minimum value of $5. Then the firm will shut down if the price of its product is less than  

a.	$5 but more than $2.
b.	$5.
c.	$4.
d.	There is not enough information given to answer the question.

20.A firm's marginal cost has a minimum value of $50, its average variable cost has a minimum value of $80, and its average total cost has a minimum value of $90. Then the firm will shut down once the price of its product falls below

a. b. c. d.

$90. $80 $50 $40

Answer 1

Cost of each worker is $12 per hour. Factory operates for 8 hours per day.

Cost of each machine is $20 per day.

Following is the complete table -

Number of Workers	Number of Machines	Output	Marginal Product of Labor	Cost of Workers	Cost of Machines	Total Cost
1	2	5	5	96	40	136
2	2	10	5	192	40	232
3	2	20	10	288	40	328
4	2	35	15	384	40	424
5	2	55	20	480	40	520
6	2	70	15	576	40	616
7	2	80	10	672	40	712

Question 1

The above table shows that when the factory produces at a rate of 70 chairs per hour and operates 8 hours per day, the factory's total labor cost is $576.

Hence, the correct answer is the option (c).

Question 2

The above table shows that the total daily cost of producing at a rate of 55 chairs per hour if the factory operates 8 hours per day is $520.

Hence, the correct answer is the option (c).