1. Suppose a chair manufacturer is producing in the short run with existing K. The manufacturer has observed the following levels of production corresponding to different numbers of workers: + Number of Workers Number of Chairs 0 0 1 10 2 18 3 24 4 28 5 30 28 25 APL MPL 6 7 Calculate the marginal and average product of labor for this production function. b. Does this production function exhibit diminishing returns to labor? Explain. Explain intuitively what might cause the marginal product of labor to become negative. +5 2. Suppose the short-run function of a company is given by TC=200+55q2, where TC is the total cost and q is the total quantity of output, both measured in thousands. a) What is the company's fixed cost? b) If the company produced 10 (thousand) units of goods what would be the average variable cost? c) What would be its marginal cost of production at q=10 (thousand) units? d) What would be the average fixed cost of production at q=10 (thousand) units? e) Suppose the market price is $10. What is the "best" level of output for the firm? Explain your answer. +7 total 3. A chair manufacturer hires its assembly-line labor for $30 an hour and calculates that the rental cost of machinery is $15 per hour. Suppose that a chair can be produced using 4 hours of labor or machinery in any combination. If the firm is currently using 3 hours of labor for each hour of machine time (so a 3:1 relationship), is it minimizing its costs of production? If so, why? If not, how can it improve the situation? +4 4. The production function for the personal computers of DISK, Inc. is given by: Q=10K5L5 Where q is the number of computers produced per day, K is the hours of machine time, and L is the hours of labor input. DISK's competitor, FLOPPY, Inc. is using the following production function: Q=10K06L0.4 a. If both companies use the same amounts of capital and labor, which will generate more output? b. Assume that capital is limited to 9 machines hours, but labor is unlimited in supply. In which company is the marginal product of labor greater? +4 total 5. A firm has a cost function given by c(y) = 10y +1000. a. What is the firm's marginal cost curve? b. At what level of output is average total cost minimized? +5