Question

Microeconomics - Production & Cost Homework Below is information concerning Clean n Shine Carwash its automated car washing equipment costs $75 per day The company pays workers 550 per day. Complete the following table Output Per Day Capital Labor TEC TVC TC M C AFC AVC Calculate Marginal Product-over what range does Clean n Shine experience increasing marginal returns? Over what range does it experience diminishing marginal returns?

Answer 1

TFC + TVC = TC

MC = TC_N - TC_N-1 where N is labor hired.

AFC = TFC / Output Per day

AVC = TVC / Output per day

ATC = TC / Output per day

Here Fixed cost (75) is washing equipment cost while variable cost is labor wages (per labor paid).

Marginal Product = Output per day_N - Output per day_N-1, where N is labor hired.

As marginal product is rising till 3 labor hired, there is increasing returns of labor till 3 labor hired while it starts falling after that which sets diminishing marginal returns from 4th labor hired.

Output Per Day	Capital	Labor	TFC	TVC	TC	MC	AFC	AVC	ATC	MP
0	1	0	75	0	75	-	-	-	-	-
30	1	1	75	50	125	50	2.50	1.67	4.17	30
70	1	2	75	100	175	50	1.07	1.43	2.50	40
120	1	3	75	150	225	50	0.63	1.25	1.88	50
160	1	4	75	200	275	50	0.47	1.25	1.72	40
190	1	5	75	250	325	50	0.39	1.32	1.71	30
210	1	6	75	300	375	50	0.36	1.43	1.79	20