Question

1. In the following market,

Workers	Output	Marginal Product	Total Cost	Average Total Cost	Marginal cost
0	0
1	20
2	50
3	90
4	120
5	140
6	150
7	155

1. Fill the column for marginal product. Can you explain diminishing marginal product based on those numbers?
2. A worker cost $45 a day, and the firm has fixed cost of $80. Use this information to fill in the column for total cost.
3. Fill in the column for average total cost.
4. Fill the column for the marginal cost.
5. Compare the column for average total cost and the column for marginal cost. Explain the relationship.

Answer 1

a.

workers	Q	MP
0	0
1	20	20
2	50	30
3	90	40
4	120	30
5	140	20
6	150	10
7	155	5

MP=change in Q/ change in workers

explain diminishing marginal product based on those numbers?

the diminishing marginal product occurs when TP increases but MP decreases with the addition of one more worker. here at 4TH worker diminishing marginal product starts as TP increases and MPL starts decreasing as worker increases.

b.

workers	Q	TC
0	0	80
1	20	125
2	50	170
3	90	215
4	120	260
5	140	305
6	150	350
7	155	395

TC=FC+VC

VC is labor cost.

FC does not change with output.

c.

workers	Q	TC	ATC
0	0	80
1	20	125	6.25
2	50	170	3.40
3	90	215	2.39
4	120	260	2.17
5	140	305	2.18
6	150	350	2.33
7	155	395	2.55

ATC=TC/Q

d.

workers	Q	TC	ATC	MC
0	0	80
1	20	125	6.25	2.25
2	50	170	3.40	1.5
3	90	215	2.39	1.125
4	120	260	2.17	1.5
5	140	305	2.18	2.25
6	150	350	2.33	4.5
7	155	395	2.55	9

MC=change in TC/change in Q

e.

when ATC is decreases MC is also decreases but MC decrease slowly than ATC. when ATC reachs its minimum MC starts increases more than ATC increases means at very fast.