Question

can you pls do these two 7 and 8, thank you

7. Consider a firm whose total cost equals $18 when output is zero. The following table shows average variable cost for this firm at several output levels AVC $20 $22 $25 a. Find the marginal cost of producing the first second, and third unit of output. Show your work clearly b. Assuming that this firm starts experiencing diminishing returns to labor as soon as the second unit of output is produced, do you expect the average total cost curve to be upward-sloping or downward-sloping when output is 4 units? WHY? Explain 8. The graph below shows the Marginal Product of Labor and the Average Product of Labor curves for a firm that produces bicycles: Labor hours (hundreds Econ 102 Homework 2 Due Friday, Feb. 7 at 1pm a. Label the two curves above and explain how you decided which curve was MP, and which was APL b. Sketch a graph of this firm's production function. Be as precise as you can and label the axes

Answer 1

Question 7:

a. Marginal cost = Change in Total cost/Change in quantity = Change in total variable cost/Change in quantity
(Because TC = TFC + TVC. AS TFC is constant, so, change in TC = change in TVC)

Q	AVC	TVC = AVC*Q	MC
0	-	0	-
1	20	20*1 = 20	(20-0)/(1-0) = 20
2	22	22*2 = 44	(44-20)/(2-1) = 24
3	25	25*3 = 75	(75-44)/(3-2) = 31

b. ATC curve will be upward sloping when output is 4 units because when there are diminishing returns then ATC is upward sloping because ATC increases with increase in output.

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