Question

Consider a day for a local junk removal company. The inputs the company uses to haul junk are two employees each paid an hourly wage of $15 per hour and a moving truck, which costs $100 (splitting the cost of ownership over periods). Each hauling job takes 1 hour.

1. Are labor hours a fixed or variable input? Explain.
2. Is the moving truck a fixed or variable input? Explain.
3. Determine the total cost (TC), total fixed cost (TFC), total variable cost (TVC), average total cost (ATC), average fixed cost (AFC), average variable cost (AVC), and the marginal cost (MC) of trimming bushes for residential lawns in the table below.

4. Graph the ATC, AFC, AVC, and MC curves.

Jobs	TC	TFC	TVC	ATC	AFC	AVC	MC
0
1
2
3
4
5
6
7
8
9
10

Answer 1

a) labur hours are variable inputs as it depends on the number of hours worked and it increase with increase in number of hours worked.

b)moving truck is a fixed input as it is independent of number of hours worked.

c)

Jobs	TC	TFC	TVC = (30*hours)	ATC	AFC	AVC	MC = ΔTC / ΔQ
0	100	100	0
1	130	100	30	130.00	100.00	30	30
2	160	100	60	80.00	50.00	30	30
3	190	100	90	63.33	33.33	30	30
4	220	100	120	55.00	25.00	30	30
5	250	100	150	50.00	20.00	30	30
6	280	100	180	46.67	16.67	30	30
7	310	100	210	44.29	14.29	30	30
8	340	100	240	42.50	12.50	30	30
9	370	100	270	41.11	11.11	30	30
10	400	100	300	40.00	10.00	30	30

d)

140 120 100 80 ATC MCAVCATCAFC 60 AFC AVC 40 * MC = ATC / 40 20 0 0 2 4 6 8 10 12 Jobs Hours