Question

Use this information for questions 6-9. Assume cost of per unit of capital is $40 and 100 units of capital is used as a fixed factor of production. Cost of per unit variable factor of production, labor, is $25. Use the production function presented below and calculate short-run costs of production and answer questions 6-9. Labor Total Point Product of Labor (TPL=0) 100 500 2.000 2.225 2,465 1,600 100 160 What is Average Fixed Cost at point D?

Answer 1

* r (per unit price) – $40 ; K= loo Extramarlo Dintel Pogetto of capital) (Page no ( 20vb Fixed ost ( F.()= K = (40) (100) - Youu wlwage of labox) = 425 - d Arorage Fixed west at point D. for D : L = 30 l = 2060... A.Fil ( Average fixed wst) - F.en you - [A.F.C = 2 Solution 7 % Arerage Total wat at point 4. ar Go L=160 Q=1600 I vclvaniable wst) = wl= (25) (160) = 4000 I Total cost (T.1) - Voct Fo(= 40out you - T. (= hooo Arenge Totul Cost CA.T.() = TL a fooo - a looo 1 [ATC=SJ solution fo Margind wat al point F - MG AG Ale Total cost at F : OF=2465 TCc = WLt Foc=25(100)+4000 ICE = 6500 Total cost at E: QE = 2225 TE=wl + F.L=25160) +4000 = 5500

sexlog Me - TC - The 6500-5560 2465 - 2235 THE = Tooo = 4.17 240 solution 98 At point D: L = 30 = 2000 Tototal cost at D : Ihre WL + F1 = 25(30) + 4600 TL = 4750 At point c: L=15; Q = 500 Total cost porn at Co 14 - WL + Fico 25(15) +4000 Tl, = 4375 Marginal wat at Di 1 Mc = Tho-lo mc = - TC-TC. - - 4756-4377 30-15 30-15 375 15 LML = 0.25] At level of employment 12-30 ]