A firm has the following production function: Q=f (L/K). It must pay $20 per hour of labor and rents its fixed inputs (K) for $30 per unit. Complete the following table and answer the questions that follow: Units of fixed input K Labor Hours (L) Output (Q) TFC TVC TC AFC AVC ATC MC 3 0 0 90 0 90 0 0 0 0 3 1 4 90 20 110 2.25 1/2 11/4 1/2 3 2 90 90 40 130 1 11/25 13/9 10/43 3 3 160 90 60 150 9/16 3/8 15/16 2/7 3 4 200 90 80 170 9/20 2/5 17/20 1/2 3 5 230 90 100 190 9/23 10/23 19/23 2/3 3 6 250 90 120 210 9/25 12/25 21/25 1 3 7 260 90 140 230 9/26 7/13 25/26 2 3 8 265 90 160 250 18/53 3/5 249/265 4 Plot AFC, AVC, ATC, and MC on a graph. Explain what happens to each one as output increases and why.
A firm has the following production function: Q=f (L/K). It must pay $20 per hour of labor and rents its fixed inputs (K) for $30 per unit. Complete the following table and answer the questions that follow: Units of fixed input K Labor Hours (L) Output (Q) TFC TVC TC AFC AVC ATC MC 3 0 0 90 0 90 0 0 0 0 3 1 4 90 20 110 2.25 1/2 11/4 1/2 3 2 90 90 40 130 1 11/25 13/9 10/43 3 3 160 90 60 150 9/16 3/8 15/16 2/7 3 4 200 90 80 170 9/20 2/5 17/20 1/2 3 5 230 90 100 190 9/23 10/23 19/23 2/3 3 6 250 90 120 210 9/25 12/25 21/25 1 3 7 260 90 140 230 9/26 7/13 25/26 2 3 8 265 90 160 250 18/53 3/5 249/265 4 Plot AFC, AVC, ATC, and MC on a graph. Explain what happens to each one as output increases and why.
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter7: Production, Inputs, And Cost: Building Blocks For Supply Analysis
Section7.A: Appendix Production Indifference Curves
Problem 2TY
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A firm has the following production function: Q=f (L/K). It must pay $20 per hour of labor and rents its fixed inputs (K) for $30 per unit.
Complete the following table and answer the questions that follow:
|
Units of fixed input K |
Labor Hours (L) |
Output (Q) |
TFC |
TVC |
TC |
AFC |
|
ATC |
MC |
|
3 |
0 |
0 |
90 |
0 |
90 |
0 |
0 |
0 |
0 |
|
3 |
1 |
4 |
90 |
20 |
110 |
2.25 |
1/2 |
11/4 |
1/2 |
|
3 |
2 |
90 |
90 |
40 |
130 |
1 |
11/25 |
13/9 |
10/43 |
|
3 |
3 |
160 |
90 |
60 |
150 |
9/16 |
3/8 |
15/16 |
2/7 |
|
3 |
4 |
200 |
90 |
80 |
170 |
9/20 |
2/5 |
17/20 |
1/2 |
|
3 |
5 |
230 |
90 |
100 |
190 |
9/23 |
10/23 |
19/23 |
2/3 |
|
3 |
6 |
250 |
90 |
120 |
210 |
9/25 |
12/25 |
21/25 |
1 |
|
3 |
7 |
260 |
90 |
140 |
230 |
9/26 |
7/13 |
25/26 |
2 |
|
3 |
8 |
265 |
90 |
160 |
250 |
18/53 |
3/5 |
249/265 |
4 |
- Plot AFC, AVC, ATC, and MC on a graph. Explain what happens to each one as output increases and why.
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