Question

3. Use the following table to complete the question. Workers Output Marginal Product Total Cost Average...

3. Use the following table to complete the question.

Workers

Output

Marginal Product

Total Cost

Average Total Cost

Marginal Cost

0

0

1

20

2

50

3

90

4

120

5

140

6

150

7

155

a) A worker costs $100 a day, and the firm has fixed costs of $200. Use this information, fill in the table.

b) What is the relationship between average total cost and marginal cost?

c) What is the relationship between marginal product and marginal cost?

Homework Answers

Answer #1

(a)

MP = Change in Q / Change in L

TC = FC + VC = 200 + 100L

ATC = TC/Q

MP = Change in TC / Change in Q

L Q MPL TC ATC MC
0 0 200
1 20 20 300 15 0.75
2 50 30 400 8 -0.23
3 90 40 500 5.56 -0.06
4 120 30 600 5 -0.02
5 140 20 700 5 0
6 150 10 800 5.33 0.03
7 155 5 900 5.81 0.09

(b)

  • When ATC is decreasing, MC is lower than MC.
  • When ATC is increasing, MC is higher than MC.
  • The ATC and MC curves intersect atthe minimum point of ATC.

(c)

  • When MP is increasing, MC is decreasing.
  • When MP is decreasing, MC is increasing.
  • When MP is maximized (minimized), MC is minimized (maximized).
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