Course Unit: Macroeconomics

Coursework

Questions:

Questions for Review 1- What is the relationship between a firm's total revenue, profit, and total cost? Draw a production function that exhibits diminishing marginal product of labor. Draw the associated total-cost curve. (In both cases, be sure to label the axes.) Explain the shapes of the two curves you have drawn. Problems and Applications 3- This chapter discusses many types of costs: opportunity cost, total cost, fixed cost, variable cost, average total cost, and marginal cost. Fill in the type of cost that best completes each sentence: a. What you give up for taking some action is called the b . is falling when marginal cost is below it and rising when marginal cost is above it. c. A cost that does not depend on the quantity produced is a d. In the ice-cream industry in the short run, includes the cost of cream and sugar but not the cost of the factory. e. Profits equal total revenue less f. The cost of producing an extra unit of output is the Crumble Corporation produces biscuits. Here is the relationship between the number of workers and output (in kilograms of biscuits) in a given day: Workers Output Marginal Total Cost Average Total |Marginal Cost Product Cost 0 1 28 2 50 3 67 4 80 5 90 6 95 96 a. Fill in the column of marginal products. What pattern do you see? How might you explain it?b. A worker costs RM30 a day, and the firm has fixed costs of RM10. Use this information to fill in the column for total cost. c. Fill in the column for average total cost. (Recall that ATC = TC/Q). What pattern do you see? d. Now fill in the column for marginal cost. (Recall that MC = ATC/=AQ.) What pattern do you see? e . Compare the column for marginal product and the column for marginal cost. Explain the relationship. -f. Compare the column for average total cost and the column for marginal cost. Explain the relationship. Healthy Juice Bar has the following cost schedules: Q (vats) Variable Cost Total Cost 0 RMO RM30 1 10 40 2 25 55 3 45 75 4 70 100 5 100 130 6 135 165 a. Calculate average variable cost, average total cost, and marginal cost for each quantity. " b. Graph all three curves. What is the relationship between the marginal-cost curve and the average-total-cost curve? Between the marginal-cost curve and the average-variable-cost curve? Explain