Question

The table sets out Sue’s Surfboards’ total product schedule.

             Labor                                     Output

      (workers per week)                (surfboards per week)

               1                                        30

               2                                        70

               3                                       120

               4                                       160

               5                                       190

               6                                       210

               7                                       220

(a). Draw the total product curve.
Calculate the average product of labor and draw the average product curve. Calculate the marginal product of labor and draw the marginal product curve.

(b). Sue’s Surfboards, in Problem 3, hires workers at $500 a week and its total fixed cost is $1,000 a week.

(i). Calculate total cost, total variable cost, and total fixed cost of each output in the table. Plot these

points and sketch the short-run total cost curves passing through them.

(ii). Calculate average total cost, average fixed cost, average variable cost, and marginal cost of each output in the table. Plot these points and sketch the short-run average and marginal cost curves passing through them.

Answer 1

A) the total product curve has been plotted in figure 1

figure 1

Average product can be found out by dividing the total product with the quantity of labor.

Marginal product is the change in output that results from employing an additional worker.

Table 1 shows the value of Average product and marginal product and they have been drawn in figure 2.

Table 1

Figure 2

b.1) Sue's surfboards hires workers at $500 a week. Variable cost can be calculated by multiplying $500 to number of workers hired. Fixed cost = $1000. Total costs can be calculated by adding the variable costs and fixed costs. Table 2 gives these costs and they are plotted in figure 3

Table 2

Figure 3

b.2) Average total cost = total cost/quantity of output

average fixed cost = fixed cost/ quantity of output

average variable cost = variable cost/quantity of output

marginal cost = change in the total cost as an additional output is produced.

Table 3 gives these costs and they are plotted in figure 4.

Table 3

Figure 4

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