Question

In: Economics

Table 1 Number of Workers Sheets of Metal per day (in pounds) 0 0 1 10...

Table 1

Number of Workers

Sheets of Metal per day (in pounds)

0

0

1

10

2

22

3

32

4

40

5

46

6

50

  1. If the average total cost of producing 12 dozen sheets of metal is $6, and the average total cost of producing 13 dozen muffins is $7, then how much is the marginal cost of producing the 13thdozen metal sheet? Explain the formulas you use and show your math.
  1. Assume that Joe’s fixed cost are $2,000, and his variable cost per worker is $400.
    1. Calculate the cost data for Joe’s roll forming company using Table 2 below.
    2. For each column, explain what is happening to Joe’s costs.
    3. Draw one graph showing Joe’s TC.
    4. Draw another graph showing Joe’s AFC, AVC, ATC, and MC.

Solutions

Expert Solution

MC=change in TC/Change in Q

= 13x7 - 12x6

= 19

a) FC=fixec cost of 2000

VC=400 per labor

MC=change in TC/Change in Q

TC=FC+VC

AFC=FC/Q

AVC=VC/Q

AC=AFC+AVC

Number of Workers Sheets of Metal per day (in pounds) FC VC TC MC AFC AVC AC
0 0 2,000.00 0.00 2,000.00
1 10 2,000.00 400.00 2,400.00 40.00 200.00 40.00 240.00
2 22 2,000.00 800.00 2,800.00 33.33 90.91 36.36 127.27
3 32 2,000.00 1,200.00 3,200.00 40.00 62.50 37.50 100.00
4 40 2,000.00 1,600.00 3,600.00 50.00 50.00 40.00 90.00
5 46 2,000.00 2,000.00 4,000.00 66.67 43.48 43.48 86.96
6 50 2,000.00 2,400.00 4,400.00 100.00 40.00 48.00 88.00

b) Fixed cost remains same at all level of output

Variable cost changes as the firm hires one ore labor

Total cost keeps on increasing as the firm increases its output.

Marginal cost first declines and then increases.

AFC will keep decreasing as FC remains constant whereas output is increasing.

AVC will decrease and then start increasing

AC curve stays above AVC curve and it also decreases at first and then increases.

MC will cut AVC and AC from below at their minimum points.

c)

d)


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