Table: Marie\'s Textbook Company Quantity of Labor (workers)of Textbooks 0 Quant
ID: 1128843 • Letter: T
Question
Table: Marie's Textbook Company Quantity of Labor (workers)of Textbooks 0 Quantity 0 20 80 130 170 200 220 2 6 (Table: Marie's Textbook Company) Marie has a small publishing company that produces textbooks. She has fixed costs of $1800 per month and hires workers (assume the only thing necessary to produce more books is to hire more labor) for $2,000 per month. The table shows Marie's monthly production function. With as much precision as possible, calculate the following: a) total cost of production when four workers are employed b) the output level that produces the lowest average total cost textbooksExplanation / Answer
Total cost (TC) ($) = Fixed cost + variable cost = 1,800 + (2,000 x L) where L: Number of workers
Average total cost (ATC) ($) = TC / Q where Q: Number of books
(a) When L = 4, TC = $9,800
(b) ATC is lowest (= $57.65) when Q = 170 books
(c) In breakeven, Revenue (= Price x Q) = Fixed cost + Variable cost
If break-even price be P, then
P x 130 = 1,800 + (3 x 2,000) [Since, when Q = 130, L = 3]
130P = 1,800 + 6,000
130P = 7,800
P = $60
L Q TC ($) ATC ($) 0 0 1,800 1 20 3,800 190 2 80 5,800 72.5 3 130 7,800 60 4 170 9,800 57.65 5 200 11,800 59 6 220 13,800 62.73Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.