A firm uses Labour (L) and Capital (K) to produce commodity (Y). The quantities of the inputs and outputs are shown in the table below. L 3 2 90 250 4 5 6. 10 K 90 90 885 90 90 90 90 90 90 90 90 Y 100 420 560 675 760 820 860 900 a. Calculate the average and marginal product of labour and plot them. What economic factors explain the shape of these curves? What is the range of output corresponding to the second stage of production? b. Assuming that the wage rate is Rs.3407- and the rental rate on capital is Rs.0.5/-, calculate the short run average variable cost, marginal cost, average fixed cost, average total cost, total variable cost, total fixed cost and total cost. Plot all these curves. c. Does the average variable cost cuts the marginal cost at the minimum point of the marginal cost? Why is this always the case? What is the relationship between the marginal cost and average variable cost in the second stage of production.

A firm uses Labour (L) and Capital (K) to produce commodity (Y). The quantities of the inputs and outputs are shown in the table below. L 3 2 90 250 4 5 6. 10 K 90 90 885 90 90 90 90 90 90 90 90 Y 100 420 560 675 760 820 860 900 a. Calculate the average and marginal product of labour and plot them. What economic factors explain the shape of these curves? What is the range of output corresponding to the second stage of production? b. Assuming that the wage rate is Rs.3407- and the rental rate on capital is Rs.0.5/-, calculate the short run average variable cost, marginal cost, average fixed cost, average total cost, total variable cost, total fixed cost and total cost. Plot all these curves. c. Does the average variable cost cuts the marginal cost at the minimum point of the marginal cost? Why is this always the case? What is the relationship between the marginal cost and average variable cost in the second stage of production.

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter7: Production And Cost In The Firm

Section: Chapter Questions

Problem 3.7P

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