Question

1. Compute the marginal products of the first through the eighth units of labor and enter them in the table. (It may be easiest to just copy and paste this whole page into your submission and complete it there.)

Marginal      Average
Units of Total product       product
labor production   of labor of labor

   0    0 0 0

   1    80 _____         _____

   2 200 _____         _____

   3 330 _____         _____

   4 400 _____         _____

   5 450 _____         _____

   6 480 _____         _____

   7 490 _____         _____

   8 480 _____         _____

2. Now compute the average products of the various quantities of labor and enter them in
the table.

3. There are increasing returns to labor from the first through the __________ units of labor and
decreasing returns from the __________ through the eighth units.

Second exercise (entirely new set of data, you're through with the table you just completed)

Now use the data given in the following table. The fixed cost of the firm is $500, and the firm’s total variable cost is indicated in the table.

Output   Total variable cost (TVC)

1                                         $?200

   2 360

   3 500

   4 700

   5 1000

   6 1800

a. Calculate average variable cost for 4 units of output.

b.Calculate average total cost for 4 units of output.

Answer 1

Answer (1). The marginal product is the change in the production output resulting from a change in a production input. When companies calculate the marginal product, they must hold all factors, with the exception of the increase in units of labor, constant. where MP = TP_n - TP _n-1

Units TP MP

1 80 _____         _____

2 200 200-80 = 120

3 330 330 - 200= 130

4 400 400-330 = 70

5 450 450-400 = 50

6 480 480-450 = 30

7 490 490 - 480 = 10

8 480 480-490 = -10

(b). Average Variable Cost Definition. The average variable cost (AVC) is the total variable cost per unit of output. This is found by dividing total variable cost (TVC) by total output (Q). Total variable cost (TVC) is all the costs that vary with output, such as materials and labor. Average products of the various quantities of labor are AVC = TVC / Q

unit TVC AVC

1. 80 80

2. 200 100

3. 330 110

4. 400 100

5. 450 90

6. 480 80

7. 490 70

8. 480 60

Answer c. There are increasing returns to labor from the first through the __third________ units of labor and
decreasing returns from the __fourth________ through the eighth units.

  

Answer 2.

Output   Total variable cost (TVC) AVC ATC = ( TVC + TFC) / q

1 200 200 200 + 200/ 1 = 400

   2 360 180 360 + 200 / 2 = 280  

   3 500 166.66 500 + 200 / 3 = 233.33

   4 700 175 700 + 200 / 4 = 225

   5 1000 200 1000 + 200 / 5 = 240

   6 1800 300 1800 + 200 / 6 = 333.33