PROBLEMS FOR CHAPTER 21 021-3 1. (a) Complete the following cost schedule: Name: connec Rate of IECONON Output Total Cost Marginal Cost Average Average PROBLEMS FOR CHAPTER 21 (cont'd) Name: $ 600 Fixed Cost Variable Average 800 Cost Total Cost 1,050 1,400 1,800 2,300 (b) Use the cost data to plot the ATC and MC curves on the accompanying graph. (c) At what output rate is ATC minimized? (Use higher rate.) MARGINAL PHYSICAL PRODUCT (pairs per day) 8 8 828 898 8 8 $1,0001 JEANS OUTPUT (pairs per da 8 :8 8 8 6 O o 2 5 :6 ZABOR INPUT ( workers per day) COST (dollars per unit) LABOR INPUT ( workers per day) .!. 400 LO21-3 5. The following table indicates the average total cost of producing varying quantities of output 300 from three different plants: 70 30 90 100 40 50 60 10 30 Rate of output 20 200 $1,100 Average total cost $800 $900 $1,000 8 $ 600 $500 $600 Small firm $500 $400 $700 700 400 500 600 650 500 350 200 300 800 500 400 300 400 500 Medium firm L,000 900 800 700 600 Large firm o (a) Plot the ATC curves for all three firms on the graph. ( b) Which plant(s) should be used to produce 40 units? QUANTITY ( units per period) 3 (c) Which plant(s) should be used to produce 100 units? (d) Are there economies of scale in these plant size choices? 1021-2 2. At what level of labor input in Figure 21.2 does marginal physical product $1,100 1,000 (a) First diminish? LO21-4 3. Suppose a company incurs the following costs: labor, $500; equipment, $300; and materials, (b) Become zero? (a) What is the total accounting cost? $200. The company owns the building, so it doesn't have to pay the usual $800 in rent. (c) Turn negative? (b) What is the total economic cost? AVERAGE COST (dollars per unit) 88 8 8 8 8 8 8 8 (c) If the company sold the building and then leased it back , what would be the change in can vary only the amount of labor input. 1021-2 4. Refer to the production table for jeans (Table 21.1). Suppose a firm has two sewing machines and (2) Accounting costs? (ii) Economic costs? (a) Graph the production function for jeans given the two sewing machines. (b) Compute and graph the marginal physical product curve. 80 90 100 o 10 20 30 40 50 60 OUTPUT (units per period) your graph of marginal physical product? (c) At what amount of labor input does the law of diminishing returns first become apparent in (b ) (d) Is total output still increasing when MPP begins to diminish? LO21-5 6. According to the World View on page 475, (a) which nation had the biggest loss of competitive (e) When total output stops increasing, what is the value of MPP? position in years 2007-2011? (b) Which nation had the biggest gain? LO21-1 7. Suppose (A) the hourly wage rate is $24 in the United States and $3 in China, and (B) productivity is 20 units per hour in the United States and 4 units per hour in China. What are unit labor costs in (a) The United States? (b) China? 477 478
