Question

1. The daily production data of a firm are given below. The wage rate is MYR...

1. The daily production data of a firm are given below. The wage rate is MYR 20 per day for each labor (variable input) and it is the only variable cost incurred. Additionally, output refers to the total products and it is in hundreds of units.

Labor

Output

AP

MP

TVC

TC

MC

AFC

AVC

ATC

0

0

-

-

40

-

-

-

-

1

18

2

37

3

57

4

76

5

94

6

111

7

127

a. Complete these production data. Calculate the average and marginal product per labor, the total variable cost, total cost, marginal cost, average fixed cost, average variable cost and average total cost for each level. Show your calculations.

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

…………………………………………………………………………………………………..

b. Based on your answer above, evaluate the patterns and relationship between:

  1. Total product (TP) and marginal product (MP).

………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………………

  1. Average product (AP) and marginal product (MP).

………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………………

  1. Marginal product (MP) and marginal cost (MC).

………………………………………………………………………………………

………………………………………………………………………………………

………………………………………………………………………………………

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Homework Answers

Answer #1

b i) Till labour 3 when output is increasing with an increasing rate rate MP rises when Output(TP) rises increases at decreasing rate MP falls.

b ii) Relationship between AP and MP

When AP is rising , AP is less than MP ( till output 3) when AP is falling, AP remains greater than MP.

c iii) Relatipnship between MP and MC

In our example MC is constant. Here MP is more than MC till the output 2. At output 3 MP = MC after which MP kept on falling.

All the best.

In case of any query feel free to leave your doubt in comment section.

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