Instructions: Answer Q.1 and Q.2. Your answers should be precise and complete. Label the graphs clearly and show all your work.
1. Cool Skaters, Inc. makes skating board. The relationship between the number of workers and
Cool Skaters' output per week is given as follows:
|
Labor
(workers per week)
|
Output
(skating board per week)
|
|
0
|
0
|
|
1
|
40
|
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2
|
100
|
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3
|
140
|
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4
|
170
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5
|
190
|
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6
|
200
|
a) Draw the production function.
b) Suppose a worker costs $100 per week and total fixed costs are $200 per week. Calculate Marginal Product, Total Cost, Total Fixed Cost, Total Variable Cost, Average Total Cost, Average Fixed Cost, Average Variable Cost, and Marginal Cost at each level of output and fill in the columns below.
|
Labor
|
MP
|
TC
|
TFC
|
TVC
|
ATC
|
AFC
|
AVC
|
MC
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0
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1
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2
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3
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4
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5
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6
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c) Draw the short-run average and marginal cost curves and state your observations on the relationship (i) between ATC and MC; and (ii) between ATC, AFC and AVC.
2. Paulina sells beef in a competitive market where the price is $5 per pound. Her total revenue and total costs are given in the following table.
|
Quantity
of Beef
(lb)
|
Total
Revenue
($)
|
Total Cost
($)
|
Profit ($)
|
Marginal
Revenue
($)
|
Marginal
Cost ($)
|
Marginal
Profit ($)
|
|
0
|
0
|
4
|
|
-
|
-
|
-
|
|
1
|
5
|
6
|
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2
|
10
|
9
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3
|
15
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14
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4
|
20
|
22
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a) Fill out the table
b) At what quantity does the marginal revenue equal marginal cost? What is price?