Question

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. 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.

Answer 1

a)

Number of workers(L)	Sheets of metal per day(Q)	FC($)	VC($)	TC($) = FC+VC	AFC($) = FC/Q	AVC($) = VC/Q	ATC($) = TC/Q	MC($) = ∆TC/∆Q
0	0	2000	0	2000
1	10	2000	400	2400	200.00	40.00	240.00	40.00
2	22	2000	800	2800	90.91	36.36	127.27	33.33
3	32	2000	1200	3200	62.50	37.50	100.00	40.00
4	40	2000	1600	3600	50.00	40.00	90.00	50.00
5	46	2000	2000	4000	43.48	43.48	86.96	66.67
6	50	2000	2400	4400	40.00	48.00	88.00	100.00

b) FC is constant over all level of output.

     VC increases as output increases

     TC increases as output increases

     AFC decreases continuously as output increases

     AVC decreases upto a certain level of output and after that it increases.

      ATC decreases upto a certain level of output and after that it increases.

      MC decreases upto a certain level of output and after that it increases.

c)

d)