Question

Labor Total product (workers) (wands per day) 0 0 1 10 25 3 45 4 60 5 70 The table above shows Randy's Wands' short-run production function. Randy hires workers at a wage rate of $120 a day and his total fixed cost is $400/day. a) What is the marginal product of the 3rd worker? b) What is Randy's average fixed cost if 25 wands are produced? What is Randy's average variable cost if 60 wands are produced? c) d) What is Randy's marginal cost of producing the 35th wand? What is Randy's average total cost if 45 wands are produced? e) MacBook Pro

Answer 1

Labor((L)	TP(Q)	MP = ∆TP/∆L	TFC($)	TVC($) = $120*L	TC($) = TFC+TVC	AFC($) = TFC/TP	AVC($) = TVC/TP	ATC($) = TC/Q	MC = ∆TC/∆Q
0	0		400	0	400
1	10	10	400	120	520	40.00	12.00	52.00	12.00
2	25	15	400	240	640	16.00	9.60	25.60	8.00
3	45	20	400	360	760	8.89	8.00	16.89	6.00
4	60	15	400	480	880	6.67	8.00	14.67	8.00
5	70	10	400	600	1000	5.71	8.57	14.29	12.00

a) The marginal product (MP) of 3rd worker is 20.

b) AFC = TFC / TP = $400 / 25 = $16.

c) AVC if 60 units are produced is $8.

d) MC of producing 35th unit is $6.

e) ATC if 45 units are produced is $16.89.