Cost and Output Determination:

An employer owns a firm with a set wage for each employee, but she want to maximize her profit margins by terminating the employee who's marginal physical product starts to decline. Calculate her Average Physical Product (APP), Marginal Physical Product (MPP = TP/Labor), Average Variable Costs (AVC = TW*L/APP), and Marginal Costs (MCLabor = TW*L/MPP). Wages are fixed at $1,000 per month.

Labor Total Product

0 0

1 50

2 110

3 180

4 240

5 290

6 330

7 360

Graph her MPP and APP then graph the MCLabor and AVC.