1. The table illustrates the amounts of output a firm can produce using different amounts of labor.
2. Calculate the Marginal Product and Average Product.
3. At what level of output does diminishing marginal product occur?
4. Assume that the firm has $100 in total fixed costs and that each additional worker costs $50 to hire. Calculate the firm's variable cost, fixed cost and total cost
5. Explain what happens to variable cost as more labor is hired.
6. Calculate the average costs for variable cost, fixed costs and total costs.
7. At what rate of production is average total cost at a minimum?
8. Why is it important for a company to know what its average total cost per item is?
9. Explain why average variable cost decreases then increases?
10. Why does average fixed cost always fall?
11. Calculate marginal cost.
12. What relationship do you see between marginal product and marginal cost?

labor Output

0 0

1 7

2 15

3 25

4 33

5 40

6 45