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Suppose that Rio Rancho Elementary School (RRES) currently employs 30 teachers, the only variable input, at a (weekly) wage rate of $700. The average product of labor (APL) (e.g. average student-teacher ratio) is 20, the last teacher added 10 units to total output (e.g. students), and the total fixed cost (TFC) is $9,000. Other things being equal.

Please show your analytical work when applicable.

a. What is marginal cost (MC) at RRES?

b. What is average variable cost (AVC) at RRES?

c. How much output (e.g. students) is being produced at RRES?

d. What is RRES' average total cost (ATC)?

e. Is ATC increasing, achieving its minimum point, constant, or decreasing? Explain. (Hint: refer to the theoretical shapes of MC, ATC, and AVC)

f. If RRES' marginal revenue (e.g. from NM state funding) is known, to optimize its benefit, it should produce at the output level (e.g. students) where ________________________ (hint: decision rule for profit/benefit maximization).

g. If in the long run, there is NO fixed cost, What is RRES' average total cost (ATC)?

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