Question

QUESTION 2

1. A firm operating in a T-shirt business has a plant of fixed size and that it can vary its output only by varying the amount of labour it employs. The table below shows the firm’s data on the unit of labour employed and the total product (number of T-shirts) produced. Assume that the cost of labour, which is $50 per unit, is the only variable cost, and the total fixed cost is $100.

No. of Labour	Total Product	Marginal Product	Total Cost	Marginal Cost
0	0	-		-
1	15
2	36
3	62
4	79
5	90

2. 1. Complete the above table by computing the marginal product, total cost and marginal cost data for all levels of labour.
3. marks)

ii. At what level that diminishing returns sets in the production? Why does this happen?

(2 marks)

1. 3. Explain the relationship between marginal product and marginal cost. Why do they have such a relationship?
2. marks)

2. The following table shows the short-run average total costs for five successively larger plant sizes (plant size a to E) for a manufacturing company.

Output level	ATC for Plant A ($)	ATC for Plant B ($)	ATC for Plant C ($)	ATC for Plant D ($)	ATC for Plant E ($)
10	9	13	16	17	20
20	7	11	13	14	17
30	6	8	11	12	15
40	7	5	7	8	14
50	8	6	4	6	12
60	9	9	6	4	8
70	10	13	12	8	6
80	14	16	16	14	9
90	17	18	19	17	14

Based on the above five possible plant sizes and their relevant short run ATCs, construct a table showing the long run ATC of the firm for output levels 10 to 90. Then, use the information to draw the long run ATC curve.

3. marks)

3. The following questions are related to collusive model of oligopoly market:
   1. Why oligopoly firms would want to collude?                                                        (2 marks)
   2. Explain the effects of the collusion on price, output and profit of the oligopolist. Graphical illustration is required.     (3 marks)

Answer 1

As per HOMEWORKLIB RULES in case of multiple questions only the first question is to be answered

Kindly ask rest of the questions in a separate post