Tiring of the hustle and bustle world of high finance, you decide to return to a simpler life, and move to Jasper, a small mountain town inhabited primarily by artisans. Your new friends in Jasper draw you into their bird carving guild. They are awed by your knowledge of economics and want you to set up a company to sell their wood carved birds. As the head of Mountain Sky Carvers of Jasper, the first thing you do is to determine how productive the artisans are and what costs are incurred when producing wood carved birds.

1. At the first meeting of Mountain Sky Carvers of Jasper, you and your colleagues decide to lease a warehouse that can be used as a manufacturing facility for the group's carved birds. The cost of this facility is $1,000 per month. Even though it is a small mountain community composed mainly of artists, labour is not cheap. Artists are willing to work for $2,000 per month. Use this information to complete the table by hand on the table provided (Table 1).

Calculate the average product of labour (AP), the marginal product of labour (MP), the total cost (TC), the total fixed cost (TFC), the total variable cost (TVC), the average total cost (ATC), the average fixed cost (AFC), the average variable cost (AVC), and the marginal cost (MC).

Answer the table on page 6 with the information.

2. Using the graph provided (Figure 1), plot marginal product and average product. The number of workers should be on the horizontal (x-axis).

Use the graph and table to answer the following questions:

1. At what employment level are the workers the most productive?

2. At what employment level does the business start to experience diminishing returns?

20,000 T 18,000 16,000 14,000 12,000 Cost 10,000 8000 6000 4000 2000 10 15 20 25 30 35 40 45 Total Product Figure 2: Total Cost, Total Fixed Cost, and Total Variable Cost 500 450 400 350 300 Cost 250 200 150 100 50 15 20 25 30 35 40 45 50 Total Product Figure 3: Average Cost, Average Fixed Cost, Average Variable Cost, and Marginal CostTable 1: Productivity and the Costs of Production Labour Total Average Marginal Total Total Total Average Average Average Marginal Product Product Product Cost Fixed Variable Total Fixed Variable Cost (AP) (MP) (TC) Cost (TFC) Cost (TVC) Cost (ATC) Cost (AFC) Cost (AVC) (MC) O 6 LO10 6+ Product 2 of 0 2 8 9 10 11 12 -2 Quantity of Labour Figure 1: Marginal and Average Productivity