Question

12. Mare & Kita sell sushi. Their sushi is hand-rolled and sold from their food truck. They have experimented with having different numbers of employees working during the same hour and have monitored how many sushi rolls the team can produce, based on the number of people working. They pay a competitive wage of $25/hour for each worker. MC/sushi roll Cost/worker Workers MP 0 8 ? (01) (Ieo 1 20 ? 12 (1 2) 2 20 ? 6 (EEF 20 ? 4 4 20 ? 5 20 56) 20 Complete the MC column for the sushi company. b. Using the same logic as in the Ben & Jerry's example in the lectures, using graph a. paper, graph the MP and MC curves and prove that the MC curve is the mirror image of the MP curve c. In your own words and in plain English, explain why it is always true that MC declines only when MP is rising and that MC rises only when MP is declining. In other words, why does MP "push" or "explain" either falling or rising MC? d. Show mathematically how MP, wages, and MC are related (go back to the lectures and reviews in this module. 12. Consider the following graph: Costs & Revenue ATC AVC A Output What does the area of the pink box, PABC, represent? (Hint: is it TC, TFC, TVC, a. MС?) b. What does the purple box, CBQO, represent? c. What does the rectangle, PAQQO, represent (This is the area of both boxes)

Answer 1

12. A.

PABC represents  total fixed cost. Since AB represents average fixed cost (average total cost - average variable cost) and CB is amount of output , so total area becomes total fixed cost.

B. CBQO represents total variable cost since it is the area below the AVC curve.

C. PAQO represents the total cost since it is the area below ATC curve.