Q 1: A COMPANY makes brooms and then sells them door to door. Here is the relationship between the number of workers and company's output in a given day:

WORKERS

OUTPUT

MARGINAL PRODUCT

TOTAL COST

AVERAGE TOTAL COST

MARGINAL

COST

0

0

1

20

2

50

3

90

4

120

5

140

6

150

7

155

a. Fill in the column of marginal products. What pattern do you see? How might you explain it?

b. A worker costs $100 per day, and the firm has fixed costs of $200. 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 = TC/Q.) 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.