Ugi 105 hw8 Productivity and Cost Curves answers

Labor Per day	Number of shoes produced per day
a. What is the marginal product of the third worker? b. At what level of labor per day does diminishing marginal productivity set in? c. In what range (of labor per day) will this firm operate?
	1	5
	2	12
	3	21
	4	29
	5	35
	6	39
	7	39
	8	35

ANS:
a. 9 shoes;
b. between 3 and 4 workers;
c. from 3 – 4 (or 3.5) to 6 – 7 (or 6.5) workers

5. Use the table below to answer the following questions:

Output	Total Cost	a. What are variable costs of producing 5 units? b. What is average total cost of producing 3 units? c. What is average fixed cost of producing 4 units? d. What is the marginal cost of producing the 2nd unit? e. What are fixed costs? f. What is average variable cost of producing 1 unit?
0	$10
1	$20
2	$28
3	$38
4	$53
5	$73
6	$99

ANS:
a. $63; b. $12.67; c. $2.50; d. $15; e. $10; f. $10

6. State whether the following describes MC (marginal cost), ATC (average total cost), AVC (average variable cost), or AFC (average fixed cost). Some statements may describe more than one cost curve.

a. Costs continuously decline as output rises.

b. Always lies above the AVC curve.
c. First declines as quantity increases, but then increases as quantity increases.
d. Cuts the ATC and AVC at their minimum points.

ANS:
a. AFC; b. ATC; c. MC, AVC and ATC; d. MC

7) Show on two separate graphs the Relationship Between

Marginal Productivity (MP) and Marginal Costs (MC) curves, indicate when MP is increasing, MC is decreasing, and vice versa on these graphs.


ANS: See CH11 PPT.