1. Compute the marginal produc
1. Compute the marginal products of the first through the eighthunits of labor and enter them in the table. (It may be easiest tojust copy and paste this whole page into your submission andcomplete it there.)
Marginal AverageUnits of Total product productlabor production of labor of labor
0 0 0 0
1 80_____ _____
2 200_____ _____
3 330_____ _____
4 400_____ _____
5 450_____ _____
6 480_____ _____
7 490_____ _____
8 480_____ _____
2. Now compute the average products of the various quantities oflabor and enter them inthe table.
3. There are increasing returns to labor from the first throughthe __________ units of labor anddecreasing returns from the __________ through the eighthunits.
Second exercise (entirely new set of data, you’rethrough with the table you just completed)
Now use the data given in the following table. The fixed cost ofthe firm is $500, and the firm’s total variable cost is indicatedin the table.
Output Total variable cost(TVC)
1 $?200
2 360
3 500
4 700
5 1000
6 1800
a. Calculate average variable cost for4 units of output.
b.Calculate average total cost for 4units of output.
Answer:
Answer (1). The marginal product is the change in the productionoutput resulting from a change in a production input. Whencompanies calculate the marginal product, they must hold allfactors, with the exception of the increase in units of labor,constant. where MP = TPn – TP n-1
Units TP MP
1 80 _____ _____
2 200 200-80 = 120
3 330 330 – 200= 130
4 400 400-330 = 70
5 450 450-400 = 50
6 480 480-450 = 30
7 490 490 – 480 = 10
8 480 480-490 = -10
(b). Average Variable Cost Definition. The average variable cost(AVC) is the total variable cost per unit of output. This is foundby dividing total variable cost (TVC) by total output (Q). Totalvariable cost (TVC) is all the costs that vary with output, such asmaterials and labor. Average products of the various quantities oflabor are AVC = TVC / Q
unit TVC AVC
1. 80 80
2. 200 100
3. 330 110
4. 400 100
5. 450 90
6. 480 80
7. 490 70
8. 480 60
Answer c. There are increasing returns to labor from the firstthrough the __third________ units of labor anddecreasing returns from the __fourth________ through the eighthunits.
Answer 2.
Output Total variable cost (TVC) AVC ATC = (TVC + TFC) / q
1 200 200 200 + 200/ 1 = 400
2 360 180 360 + 200 / 2 = 280
3 500 166.66 500 + 200 / 3 = 233.33
4 700 175 700 + 200 / 4 = 225
5 1000 200 1000 + 200 / 5 = 240
6 1800 300 1800 + 200 / 6 = 333.33