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Coretta leases a workshop, in which she weaves rugs from marsh grass she gathers [for free) from a nearby riverside. She nds that if she

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Coretta leases a workshop, in which she weaves rugs from marsh grass she gathers [for free) from a nearby riverside. She nds that if she works alone for a day, she can weave two rugs. If she hires one additional worker, together they can weave 5 rugs in a day, each specializing in some of the tasks. Adding a third worker also allows for more specialization, bringing production up to B rugs. Adding a fourth worker adds only 2 rugs to production, because there are no more gains from specialization to be had. Hiring a fth worker adds only one additional rug to daily production, because now the workshop space is getting crowded. a. What is the output in this example? What is the xed input? What is the variable input? b. Complete columns [1) to [3] of this table, showing how number of workers is related to the total and marginal number of rugs produced: Total lEiutput Average Marginal Cost of an Marginal {Number of Rugs} output output Additional Cost of {number of {Number of Worker Production [5 per Rusi c. On a graph Sketch Coretta's TP, AP, MP curves for rugs. e. Are there ranges of production characterized by increasing returns? Constant returns? Diminishing returns? Mark these on your graph. f. Suppose that rent for the workshop space costs Coretta $50 per day [whether she produces anything or not]. Her cost forlahor is $80 per worker per day [the opportunity costs of her own laboris $80 as well]. Complete columns [4] through [6} in the table above, showing her xed, variable, and total costs of producing various numbers of rugs. g. (in a graph, sketch TC, AC and MC curves

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