Question

In: Economics

Using the information in data set one, which I have included in the table below, recalculate total cost, fixed cost, variable cost, marginal cost, average total cost, average variable cost and average fixed costs if the price of the variable input (which

Problem Two

Using the information in data set one, which I have included in the table below, recalculate total cost, fixed cost, variable cost, marginal cost, average total cost, average variable cost and average fixed costs if the price of the variable input (which is labor in this example) is not $50 but $55. I have created Table 2 for you to put your answers in. Assume that fixed costs remain at $220. When the price of a variable input changes which other costs will increase? Compare the costs you calculate for table two to the costs calculated in table one to find your answers.

Table Two for Answers to Problem Two

Units of Labor	Total Product (output)	FC	VC	TC	MC	ATC	AVC	AFC
0	0
1	3
2	7
3	12
4	16
5	19
6	21

Expert Solution

FC = $ 220 thus for all levels it would remain the same.

Cost of labor = $ 55

1 unit of labor = $ 55 × 1 = $ 55

2 unit of labor = $ 55 × 2 = $ 110 like wise for all we can calculate the VC.

TC = FC + VC

MC = ∆ TC /∆Q

ATC = TC /Q

AFC = FC /Q

AVC = VC /Q

With the help of these formula we can determine all the values.

Refer the attached picture for the table

Here only table two is provided thus I cannot compare it with the table one as it is not provided.

Rahul Sunny answered 2 years ago

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