Q.1. Pak surgical makes masks and then sells them on door to door. Here is the relationship between number of workers and Pak surgical output in each day: Workers Output Marginal Product Total Cost Average total cost Marginal cost 0 0 1 10 2 40 3 80 4 110 5 130 6 140 7 145 a) Fill in the column of marginal products. What pattern do you see? How might you explain it? b) A worker costs $100 a day, and the firm has fixed costs of $200. Use this information to fill in the column for total cost. c) Fill in the column for average total cost. What pattern do you see? d) Now fill in the column for marginal cost. What pattern do you see? e) Compare the column for marginal product and the column for marginal cost. Explain the relationship. f) Compare the column for average total cost and the column for marginal cost. Explain the relationship. Q.2. (a) Define economies of scale and explain why they might arise. Define diseconomies of scale and explain why they might arise. Also draw the long run average total cost curve to explain the economies and diseconomies of scale. (b) Show the relationship between Marginal cost and Average total cost curve for a typical firm
Q.1. Pak surgical makes masks and then sells them on door to door. Here is the relationship
between number of workers and Pak surgical output in each day:
Workers Output Marginal
Product
Total Cost
cost
Marginal cost
0 0
1 10
2 40
3 80
4 110
5 130
6 140
7 145
a) Fill in the column of marginal products. What pattern do you see? How might you explain it?
b) A worker costs $100 a day, and the firm has fixed costs of $200. Use this information to fill in
the column for total cost.
c) Fill in the column for average total cost. What pattern do you see?
d) Now fill in the column for marginal cost. What pattern do you see?
e) Compare the column for marginal product and the column for marginal cost. Explain the
relationship.
f) Compare the column for average total cost and the column for marginal cost. Explain the
relationship.
Q.2. (a) Define economies of scale and explain why they might arise. Define diseconomies of scale
and explain why they might arise. Also draw the long run average total cost curve to explain
the economies and diseconomies of scale.
(b) Show the relationship between Marginal cost and Average total cost curve for a typical
firm.
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