and b below. Units of Labor/Day 5 6 7 8 9 Units of Output/Day 120 140 155 165 16
ID: 1139700 • Letter: A
Question
and b below.
Units of Labor/Day 5 6 7 8 9
Units of Output/Day 120 140 155 165 168
The price of labor is $20 per day. Ten units of capital are used each day, regardless of output level. The price of capital is $50 per unit.
a. Calculate the marginal and average product of each unit of labor input. Next, calculate total, average total, average variable, and marginal costs. You can create a table for your answers. Use the table icon (it is next to the anchor icon). Please note that your table should have 8 columns as follows: Labor Output MP AP TC ATC AVC MC
b. Can you tell where diminishing marginal returns sets in?
Labor
Output
MP
AP
TC
ATC
AVC
MC
5
120
6
140
7
155
8
165
9
168
Labor
Output
MP
AP
TC
ATC
AVC
MC
5
120
6
140
7
155
8
165
9
168
Explanation / Answer
Marginal product=Total output for n labor unit- total ouput by using (n-1) labor units
Average product= Total output / labor units employed
Total cost =Fixed cost + Variable cost. here the fixed cost is the cost incurred on capital units and is pcnstant at 500 and variable cost is cost incurred on labor units
Marginal cost= Total cost on n units of product-total cost on (n-1) unit of product.
Labor
Output
MP
AP
TC
ATC
AVC
MC
5
120
6
140
7
155
8
165
9
168
The marginal cost for the last unit is also 20.
Since we don't have data for the output when 4 units of the labor is employed and so we take amrginal product when 5 units of labor is used to be 20 . And hence the diminishing marginal returns sets in when 6 units of labor is employed
Labor
Output
MP
AP
TC
ATC
AVC
MC
5
120
20 120/5=24 20*5+500=600 600/120=5 100/120=0.836
140
140-120=20 140/6=23.33 6*20+500=620 620/140=4.43 120/140=0.86 620-600=207
155
155-140=15 155/7=22.14 7*20+500=640 640/155=4.13 140/155=0.90 640-620=208
165
165-155=10 165/8=20.62 8*20+500=660 660/165=4 160/155=1.03 660-640=209
168
168-165=3 168/9=18.67 20*9+500=680 680/168=75.56 180/168=1.07Related Questions
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