Apply Concepts of Short Run Costs Lesson 2, Page 3 - Investigate Production in the Short Run 1. Complete the table below by calculating average product and marginal product based on total production data. m Total Product Average Product Marginal Product 2. Graph the total product, average product, and marginal product curves. Insert the graph below: 3. Where do the average product and the marginal product curves intersect? 4. What range of inputs provides increasing marginal returns? 5. What range of inputs leads to decreasing marginal returns? 6. At what point are there negative marginal returns? Lesson 3, Page 3 7. Complete the table below and assume that the firm pays $8 per hour for labor. Labor Variable AFC (hours) 10 20 30 40 50 8. Graph the AFC, AVC, ATC and MC curves. Insert the graph below: 9. Describe all the changes that would take place on these graphs if the firm's fixed costs 10. Describe all the changes that would take place on these graphs if the firm increased its pay rate to $10 per hour. Lesson 3, Page 6 11. Enrique runs a flower stall in the local shopping mall. The stall rents for $1,600 a month. Enrique buys the flowers at $2 a bunch and sells them for $3 a bunch. He'll be open seven days a week, eight hours a day, and plans to sell 100 bunches of flowers a day. He's hired Rosita to work three hours each of the five school days and eight hours each day on Saturday and Sunday. Enrique pays Rosita $6 an hour. He works at the stall whenever Rosita is not working. If Enrique didn't work at the flower stall, he'd make $10 an hour as a cook. How much accounting profit and how much economic profit does Enrique make a week? Explain how you calculated your answer (assume there are 4 weeks in a month). 12. Marginal Product A. What is marginal product? B. Calculate the marginal product. M Total Outputs in Unites Marginal Product n n 12. Marginal Product A. What is marginal product? B. Calculate the marginal product. W Total Outputs in Unites Marginal Product C. Graph the marginal product from the table you just completed. Insert it below: D. What is the marginal product of the 4th worker? Explain how you got this answer. E. At which worker does diminishing marginal returns set in? Why? 8. Costs in the Long Run A. In the short run there are fixed and variable costs, but in the long run all costs are