Question

Chapter 9 Cost and Productivity Exercises Name: The following problems are designed to help with the relationship between the costs and productivity measures. Answer each question separately because it does not depend on the other answers. 1. If Bill's Pizza Parlor can serve 30 tables with 3 waiters and 35 tables with 4 waiters, the marginal product of the fourth waiter is ). 2. If Clean Ft. Myers garbage collection company employs 2 workers on a garbage truck and they pick up 200 cans of trash, the average product of labor is . 3. If a Bill's total fixed cost (TFC) is $100 and its total variable cost (TVC) is $200 when it produces 20 pizzas, its average total cost (ATC) is ( ). 4. If ATC is $5 and AVC is $2, the AFC is . 5. If average variable cost (AVC) is $5 when Bill's produces 30 pizzas, its total variable cost is ). 6. If Bill's total fixed cost (TFC) is $350 when it produces 5 pizzas, its total fixed cost when it produces 6 pizzas is ). 7. If Bill's total fixed cost (TFC) is $200 when he produces 40 pizzas, its average fixed cost (AFC) is ( ) 8. If Bill's average variable cost (AVC) is $100 when he produces 5 pizzas and his total fixed cost (TFC) is $100, his total cost (TC) is ). 9. If The Burger Palace sells 25 hamburgers and its total costs are $75, its per- hamburger cost is ). 10. If FSW's total variable cost (TVC), such as professors' salaries and dry erase markers, is $6,000,000 when it has 1,000 students and the total fixed costs (TFC), such as buildings, is $1,000,000, the per-student total cost is ).

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Answer 1

Ans. 1) Number of workers (L) Total Product ( TP)

3 waiters 30 tables

4 waiters 35 tables

Marginal Product ( MP) = change in TP/ change in L

  MP₄ = ( 35 -30 ) tables/ (4 -3 ) waiters

MP₄ = 5 tables

Hence, the marginal product of fourth waiter is 5 tables.

Ans.2) L = 2 workers , Total Product ( TP) = 200 cans of trash

Average Product (AP) = TP/L

= 200/ 2

AP = 100 cans of trash per worker

Hence, the average product of labor is 100 cans of trash per worker.

Ans.3) TFC = $100, TVC = $200, when Q = 20 pizzas

TC = TFC + TVC

TC = $100 + $200

TC = $300

ATC = TC/ Q

ATC = $300/20 = $15 per pizza

Hence, the average total cost is $15 per pizza.

Ans.4) ATC =$5, AVC = $2

ATC = AFC + AVC

AFC = ATC - AVC

AFC = $5 - $2

AFC = $3

Hence, the average fixed cost is $3

Ans. 5) AVC = $5 when Q = 30 pizzas

AVC = TVC /Q

TVC = AVC x Q

TVC = $5 x 30

TVC = $150

Hence, the total variable cost is $150.

Ans.6) TFC = $350 when Q = 5 pizzas

when Q = 6 pizzas, TFC = $350

Note: Total Fixed cost will remain fixed at each output level and exist even at Q = 0 pizza.

Ans.7) TFC = $200 when Q = 40 pizzas

AFC = TFC / Q

AFC = $200 / 40

AFC = $5 per pizza

Hence, the average fixed cost is $5 per pizza.

Ans. 8) AVC = $100 when Q = 5 pizzas

TFC = $100

AVC = TVC / Q

TVC = AVC x Q

TVC = $100 x 5

TVC = $500

then, TC = TFC + TVC

TC = $100 + $500

TC = $600

Hence, the total cost is $600.

Ans. 9) when Q = 25 hamburgers

TC = $75

ATC = TC /Q

ATC = $75/ 25

ATC = $3 per hambergers

Hence, per hamburger cost is $3.

Ans.10) TVC = $6,000,000

Q = 1000 students

TFC = $1,000,000

TC = TFC + TVC

TC = $1,000,000 + $6,000,000

TC = $7,000,000

ATC = TC /Q

ATC = $7,000,000/1000

ATC = $7,000 per student

Hence, the per student total cost is $7,000.