Question

Crumble Corporation produces cookies. Here is the relationship between the number of workers and output (in dozens of cookies) in a given day Average Total Marginal Marginal Workers 'Output Product Total Cost Cost Cost 0 0 28 40 143 28 1 70 4 2 50 피300 14일 2.31 17 3 67 kly23 La 18 4 80 lo 5 90 95 30 7 96 220 a. Fill in the column of marginal products. What pattern do you see? How might you explain it? U b. A worker costs $30 per day and the firm has t fixed costs of $10. Use this information to fill 2 in the column for total cost. c. Fill in the column for average total cost. (Recall that ATC = TC/Q.) What pattern do you see? d. Now fill in the column for marginal cost. (Recall that MC = ATC/AQ.) What pattern do you see? Compare the column for marginal product and the column for marginal cost. What pat- tern do you see? e. +

Answer 1

Sol:-

Qw	Qo	MP	TC	ATC(TC/QO	MC
0	0	. 0	10	infinity	—
1	28	28	40	1.42	1.07
2	50	22	70	1.4	1.36
3	67	17	100	1.49	1.76
4	80	13	130	1.62	2.30
5	90	10	160	1.78	3
6	95	5	190	2	6
7	96	1	220	2.29	30

a- Initially it increases then decreases. So its curve will be inverse 'U' shaped (Law of variable proportion operating in the short - run.

b. TFC =10

SO at each level of output 10 is added to the TVC.

c. Initially it decreases then it increases. So its curve will be 'U'

shaped. (The law of variable proportion operating.)

d. Initially it is decreasing then increasing. Its curve will be 'U' shaped.

Explanation. When MP increases MC decreases and vice versa.