Question

please answer all questions!!!

Table 13-2 Adrianne's Premium Packaging Service subcontracts with a chocolate manufacturer to box premium chocolates for their mail-order catalogue business. She rents a small room for $250 a week in the downtown business district that serves as her factory. She can hire workers for $275 a week Chocolates Marginal Number of Produced per Product of Workers Week Labour Cost of Factory Cost of Workers Total Cost 300 $250 $275 $525 630 $825 S1075 890 I s 950 60 $1375 $1900 Refer to Table 13-2. What is the marginal product (MP) of the second worker? OOOO

Answer 1

1) Marginal product for i_th worker is the difference between output produced using i workers and output produced using i-1 number of workers.

Example, for worker 2, marginal product is difference between output produced by 2 workers minus output produced by 1 worker = 630-300=330

2)

From the table, we can see that marginal product is falling continuously. We are sure that even if she hires more workers, she cannot finish her order on time. Hence third option is not viable. Committing to a order and then not fulfilling it reduces her credibility. Moving to a larger room and hiring more workers will just increase her costs and not contribute anything to productivity

No. of worker Chocolates per week MPL & Cost of Worker Total lost 00 275 250 300 525 250 550 800 o - dmt in e 330 150 110 250 1075 300 630 7780 890 950 960 825 250 1100 1350 60 250 1625 10 250 1375 1650 1900

So, the correct answer is shut down until she finds more productive workers

3) Efficient output is where marginal cost are equal to average variable cost, which only happens at minimum of average variable cost curve, where marginal cost curve cuts it and then starts rising

So, answer is level of output which minimizes average cost curves

4) Fixed cost is just the difference between total cost and marginal cost, which in this case is $45,000-$25,000=$20,000

5) Marginal product increases as long as marginal costs are falling. At point where marginal cost equal marginal product, is the equilibrium. Beyond that point, marginal costs increase and marginal benefits starts falling.

So, the answer is when curve A is falling