The production function for a firm is: q=-0.6L3+18L2K+10L where q is the amount of output, L is the number of labor hours per week, and K is the amount of capital. The wage is w = $100 and the rental rate is r = $800 per time period. a Using Excel, calculate the total short-run output, q(L), for L = 0, 1, 2, …, 20, given that capital is fixed in the short run and K = 1. Also calculate the average product of labor; APL, and the marginal product of labor, MPL. b For each quantity of labor in (a), calculate the variable cost, VC; the total cost, C; the average variable cost, AVC; the average cost , AC; and the marginal cost, MC. Using excel, draw the AVC, AC, and MC curves in a diagram.
The production function for a firm is: q=-0.6L3+18L2K+10L where q is the amount of output, L is the number of labor hours per week, and K is the amount of capital. The wage is w = $100 and the rental rate is r = $800 per time period. a Using Excel, calculate the total short-run output, q(L), for L = 0, 1, 2, …, 20, given that capital is fixed in the short run and K = 1. Also calculate the average product of labor; APL, and the marginal product of labor, MPL. b For each quantity of labor in (a), calculate the variable cost, VC; the total cost, C; the average variable cost, AVC; the average cost , AC; and the marginal cost, MC. Using excel, draw the AVC, AC, and MC curves in a diagram.
Chapter10: Cost Functions
Section: Chapter Questions
Problem 10.4P
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The production function for a firm is: | ||||||
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q=-0.6L3+18L2K+10L where q is the amount of output, L is the number of labor hours per week, and K is the amount of capital. The wage is w = $100 and the rental rate is r = $800 per time period. |
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a | Using Excel, calculate the total short-run output, q(L), for L = 0, 1, 2, …, 20, given that capital is fixed in the short run and K = 1. Also calculate the average product of labor; APL, and the marginal product of labor, MPL. | |||||
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b | For each quantity of labor in (a), calculate the variable cost, VC; the total cost, C; the |
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Hint: you will not be able to solve the total product curve for L as a function of output. So, instead construct a table, See the headings. |
Use this definition | ||||||||||||||
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q | L | MPL | APL | TVC | TFC | TC | MC | AVC | AFC | ATC | r | w | Start | Step |
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