Question

Question 2 le sets out Sue's Surfboard's total product schedule. Labor (workers per week) Output (sur hoards per week) 10 100 170 190 200 (a) Calculate the average product of labor and draw the average product curve (b) Calculate the marginal product of labor and dratw the marginal product curve. (c) Suppose the local newspaper hires students to fold and bag newspapers for delivery and pays them $30 per shift. Five students can fold and bag 400 newspapers per shift. The fifth student added 60 newspapers to total output. The capital cost is tixed at S70 per shift. Is the newspaper operating in the long run or short run? Why? 0 What is the average product of 5 students? () Calculate the total fixed cost,toal cost, average variable cost, and average total cost of folding and bagging 400 newspapers. (ii) What is the marginal cost of one of the 60 newsppers fotled and bagged by the fifth student? (d) "Diminishing marginal returns and diseconomies of sn are tw different names for the same thing." Is the statement correct? Explai 15

Answer 1

a.

MPL APL 40 50 140 46.66667 46.66667 42.5 38 200 33.33333 33.33333 40 40 9 9 100 50 170 190 42.5 38

APL=Q/L

MPL=Qn-Qn-1

APL 60 50 30 APL 2 5 0 1 3 4 6

b.

MPL 60 50 MPL 0 2 3 5 1 4 6

c.

The payment for each student for a shift is MC=$30 per shift

Five student fold and bag 400 newspaper, so Total output =400

The fifth student produce output (MP)=60

Fixed capital cost=$70 per shift.

This newspaper operating is in the short-run because there is fixed cost.

i

Average product of five student= TP/L

=400/5

=80

ii.

For producing 400 newspaper.

Total fixed cost=$70

Total cost=FC+VC

=70+wage* labor quantity

=70+30*5

=70+150

=$220

iii.

Since every student is hired for $30 per shift. Hence the MC of the fifth student who fold and bag 400 newspaper is $30.

d.

The diminishing marginal return sets in when MPL of starts decreasing. Hence It can be said that diminishing marginal return sets in after L1 unit of labor.

The diseconomies of scale exist when long-run Average total cost continues to increase with the increase in the output level.

It means both name are different and their definition is also different.

Hence the given statement is false.