EC215-Computer Homework

On the costs of production

Due: June 3, 2021

Directions: For each of the following problems you should use EXCEL to calculate the various

measures of costs. There are supplemental instructions for each problem. For your final copy to

turn in you should make sure that each problem is numbered and that headings are provided for

each column of numbers. You should also provide headings for each problem and graph and

other appropriate documentation. Round all numbers to two decimal points.

1. You are given the following total cost function for a firm:

TC = (25+F) + L

Q + 0.5

(Q

2

)

where F=the number of the letter of the alphabet corresponding to the initial of

your first name, and L=number of the letter of the alphabet corresponding to the

initial of your last name. For example, if your name were Bill Weber, F=2 and

L=23, so

TC = 27 + 23

Q + 0.5

Q

2

.

a.

Calculate TC, TFC, and TVC for the levels of output between Q=0 and Q=30

(i.e., Q=0, Q=1, Q=2, Q=3,..., Q=29, Q=30). Make a graph of TC, TFC, and

TVC as a function of Q. (Use an xy graph, connect the points, and make sure

these three curves are all on the same graph.)

b.

Calculate ATC, AFC, AVC, and MC as a function of Q and produce a graph of

the ATC, AFC, AVC, and MC curves as a function of Q. (Again, use xy graph,

connect the points, and make sure these curves are all on the same graph. Also,

since ATC, AFC, AVC, and MC are not defined at Q=0, start your graph using

Q=1, not Q=0.)

2.

The marginal product of labor schedule for a firm is given below for alternative levels of

labor. Calculate the total product schedule, Q, for each level of labor employed. Also

calculate the average product schedule, AP

L

.

a.

Produce a graph of the production function. ie. a graph of Q on the vertical axis

and L on the horizontal axis. Identify on your graph where diminishing returns to

labor set in.

b.

Produce a graph of the marginal product and average product schedules. Put AP

L

and MP

L

on the vertical axis and L on the horizontal axis.

c.

Calculate the MC schedule for the firm if the firm faces a price of labor (the

wage) of w=$First and w=$(First+Last), where First=# of the letter corresponding

to your first name and Last=# of the letter corresponding to your last name. For

instance, B=2, so the wage, w, for the TVC (w=First) column is w=$2. That is,

the producer has to pay a wage of $2 per unit of labor. Produce a graph of the two

MC schedules as a function of Q. (graph MC on the vertical axis and Q on the

horizontal axis for each w. Use the xy graph. The two marginal cost curves

should be on the same graph.) MP

L

=marginal product of labor. (I am providing

the columns for TVC because you will use it to calculate MC).

d.

Explain what happens to marginal cost when the price of labor increases.