You and your family have decided to go into the restaurant business selling chic

Question

You and your family have decided to go into the restaurant business selling chicken wings. The following table displays different quantities of variable input in hours of labor you could employ and the resulting total output of chicken wings produced monthly. Assume that the cost of the labor which is the variable input is $8.50/hour. Assume also that the restaurant incurs monthly fixed costs of $250 for rent, insurance, taxes, and other inputs. You are interested in knowing some production and cost information for your new business. Using the formulas provided in your text, complete the following Production and Cost table (which is already partially completed for you) by filling in the highlighted blanks for Marginal Physical Product (MPP), Total Cost (TC), Average Fixed Cost (AFC), Average Variable Cost (AVC), Average Total Cost (ATC) and Marginal Cost (MC). (Note: Because Marginal Physical Product and Marginal Cost are found as Changes, their blanks are placed on the in-between rows.)

Explanation / Answer

TC = 632. 5 ; 717.5 ; 802.5 ;

AFC = 1 ; 0.85 ; 0.75 ;

AVC = 1.58 ; 1.595 ; 1.67 ;

ATC = 2.58 ; 2.445 ; 2.42 ;

MC = 1.67 ; 2.24 ; 2.93;

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