A. A firm’s fixed costs for 0 units of output and its average total cost of producing different output levels are summarized in the table below. Complete the table to find the fixed cost, variable cost, total cost, average fixed cost, average variable cost, and marginal cost at all relevant levels of output. (1) (2) (3) (4) (5) (6) (7) (8) Quantity Q Fixed Cost FC Variable Cost VC Total Cost TC Average Fixed Cost AFC Average Variable Cost AVC Average Total Cost ATC Marginal Cost MC 0 15,000 - 100 300 200 200 300 175 400 225 500 325 600 400 B. Suppose that the marginal product of the last worker employed by a firm is 40 units of output per day and the daily wage that the firm must pay is $20, while the marginal product of the last machine rented by the firm is 120 units of output per day and the daily rental price of the machine is $30. Show if the firm is using the cost-minimizing combination of labour and capital and give appropriate advice if necessary.
A. A firm’s fixed costs for 0 units of output and its
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(1) |
(2) |
(3) |
(4) |
(5) |
(6) |
(7) |
(8) |
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Quantity Q |
Fixed Cost FC |
Variable Cost VC |
Total Cost TC |
Average Fixed Cost AFC |
Average Variable Cost AVC |
Average Total Cost ATC |
Marginal Cost MC |
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0 |
15,000 |
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- |
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100 |
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300 |
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200 |
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200 |
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300 |
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175 |
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400 |
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225 |
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500 |
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325 |
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600 |
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400 |
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B. Suppose that the marginal product of the last worker employed by a firm is 40 units of output per day and the daily wage that the firm must pay is $20, while the marginal product of the last machine rented by the firm is 120 units of output per day and the daily rental price of the machine is $30. Show if the firm is using the cost-minimizing combination of labour and capital and give appropriate advice if necessary.
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