Short-run production and cost problem for a firm operating in a competitive labor (resource) market
1 / 2 / 3 / 4 / 5 / 6 / 7 / 8 / 9 / 10 / 11 / 12# of workers (L) / Total product (Q) / Average Product
(Q/L) / Marginal Product (DQ/DL) / Cost per Worker (W) / Total Variable Cost
(WXL) / Marginal Cost (DTVC/DQ) / Cost of Capital (TFC) / Total Cost
(TFC +TVC) / AFC
(TFC/Q) / AVC
(TVC/Q) / ATC
(TC/Q)
0 / 0 / XXXXX / $1000 / XXXXX / $1000
1 / 15 / $1000 / $1000
2 / 40 / $1000 / $1000
3 / 70 / $1000 / $1000
4 / 95 / $1000 / $1000
5 / 115 / $1000 / $1000
6 / 130 / $1000 / $1000
7 / 140 / $1000 / $1000
8 / 145 / $1000 / $1000
XXXXX / XXXXX
Part 1
1. Calculate the numbers appropriate for each blank in columns 3 and 4 and write them in.
2. On one sheet of 8½ by 11½ inch paper construct two graphs, each with a four inch vertical axis and a six inch horizontal axis. Use the same units of measurement on each horizontal axis and make sure that the two graphs align vertically.
3. On the upper graph plot Total Product (Q) on the vertical axis against Labor (L) on the horizontal axis.
4. On the lower graph plot Average Product (AP) and Marginal Product (MP) on the vertical axis against Labor (L) on the horizontal axis.
Part 2
1. Calculate the numbers appropriate for each blank in the remaining columns.
2. On another sheet of 8½ by 11½ inch paper construct two more graphs, each with a four inch vertical axis and a six inch horizontal axis. Use the same units of measurement on each horizontal axis and make sure that the two graphs align vertically.
3. On the upper graph, plot Total Cost (TC), Total Fixed Cost (TFC) and Total Variable Cost (TVC) on the vertical axis against Output (Q) on the horizontal axis.
4. On the lower graph, plot Average Total Cost (ATC), Average Fixed Cost (AFC), Average Variable Cost (AVC) and Marginal Cost (MC) on the vertical axis against Output (Q) on the horizontal axis.