A firm faces the following costs: total cost of capital = $1500; price paid for labor = $14 per labor unit; and price paid for raw materials = $5 per raw-material unit.
a. Suppose the firm can produce 5500 units of output this year by combining its fixed capital with 100 units of labor and 450 units of raw materials. What are the total cost and average total cost of producing the 5500 units of output?
Instructions: Round your answers to two decimal places.
TC = $
ATC = $
b. Now assume the firm improves its production process so that it can produce 6250 units of output this year by combining its fixed capital with 100 units of labor and 450 units of raw materials. What are the total cost and average total cost of producing the 6250 units of output?
Instructions: Round your answers to two decimal places.
TC = $
ATC = $
c. If units of output can always be sold for $1 each, then by how much does the firm
a. Suppose the firm can produce 5500 units of output this year by combining its fixed capital with 100 units of labor and 450 units of raw materials. What are the total cost and average total cost of producing the 5500 units of output?
Instructions: Round your answers to two decimal places.
TC = $
ATC = $
b. Now assume the firm improves its production process so that it can produce 6250 units of output this year by combining its fixed capital with 100 units of labor and 450 units of raw materials. What are the total cost and average total cost of producing the 6250 units of output?
Instructions: Round your answers to two decimal places.
TC = $
ATC = $
c. If units of output can always be sold for $1 each, then by how much does the firm
Related textbook solutions
Related questions
A firm's fixed costs for 0 units of output and its average total cost of producing different output levels are summarized in the table below. Complete the table to find the fixed cost, variable cost, total cost, average fixed cost, the average variable cost, and marginal cost at all relevant levels of output.
Instruction: Round your answers for Average Fixed Cost (AFC) and Average Variable Cost (AVC) to 2 decimal places.
|
Q |
FC |
VC |
TC |
AFC |
AVC |
ATC |
MC |
|
0 |
$15,000 |
- |
- |
- |
- |
||
|
100 |
300 |
||||||
|
200 |
200 |
||||||
|
300 |
175 |
||||||
|
400 |
225 |
||||||
|
500 |
325 |
||||||
|
600 |
400 |
Use the following information on a hypothetical short-run production function to answer questions A-C.
The price of labor is $20 per day.
Ten units of capital are used each day, regardless of output level.
The price of capital is $50 per unit.
(A). Calculate the marginal product (MP) and average variable product (AP) of each unit of labor input.
(B). Calculate total (TC), average total (ATC), average variable (AVC), and marginal costs (MC).
(C). Can you tell where diminishing marginal returns sets in?
| Labor (L) | Output (Q) | MP | AP | TC | ATC | AVC | MC |
| 5 | 120 | -- | -- | ||||
| 6 | 140 | ||||||
| 7 | 155 | ||||||
| 8 | 165 | ||||||
| 9 | 168 |
