Question 4

For a given scale of plant, the following table gives the total weekly output of table attainable using varying quantities of labor.

Workers

Output

Marginal Product

Average product

0

0

5

20

10

50

15

100

20

180

25

240

60

270

35

290

40

310

a)Fill the table

b)Draw the marginal product and the average product (remember, the MP must be plotted at midpoints)

c)Now, consider the short run costs. Suppose the cost of 1 worker is $500 a month and the fixed cost is $6000 a month. Fill the following table.

Workers

Output

TFC

TVC

TC

MC

AFC

AVC

ATC

0

0

5

20

10

50

15

100

20

180

25

240

60

270

35

290

40

310

d)Graph the TC, TFC and TVC on the same graph.

e)Graph the AVC, AFC, ATC and MC on the same graph.

f)Now suppose that the cost of a worker increases to $800 a month. Explain the effect of this change on the MC, AVC, AFC and ATC curves.