(A) With P=20, W=25 and TFC = 500: Average Total Variable Physical Cost Cost Product of (TC) (VC) Labour (APPL) Labor Output Marginal (Q) Physical (L) Product of Labour (MPPL) 5 10 25 35 50 60 10 25 60 70 80 90 2 AVC=VC/Q ATC=TC/Q 3 4 2 2 1 2 2.5 2.4 2 1.6 1.5 MPPL = Change in Q / Change in L APPL=Q/L TC = TFC + VC VC=W* L MC = Change in TC / Change in Q 625 750 1125 1750 125 2000 250 1835 875 625 1250 1500 Marginal Cost (MC) 15 10 6 10 15 30 Average Average Variable Total Cost (ATC) Cost (AVC) 12.50 10.00 10.42 12.50 15.63 16.62 62.5 30.00 18.75 26.21 21.88 22.22 Based on this table, answer this: 1. How much output will this firm produce? If the price of output increases to $30, how does your answer change? 2. If the productivity of labor increases by 10% (all else equal), how much more labor will the firm hire? 3. Below what price will this firm decide to produce zero units of output? (i.e. shut down)
(A) With P=20, W=25 and TFC = 500: Average Total Variable Physical Cost Cost Product of (TC) (VC) Labour (APPL) Labor Output Marginal (Q) Physical (L) Product of Labour (MPPL) 5 10 25 35 50 60 10 25 60 70 80 90 2 AVC=VC/Q ATC=TC/Q 3 4 2 2 1 2 2.5 2.4 2 1.6 1.5 MPPL = Change in Q / Change in L APPL=Q/L TC = TFC + VC VC=W* L MC = Change in TC / Change in Q 625 750 1125 1750 125 2000 250 1835 875 625 1250 1500 Marginal Cost (MC) 15 10 6 10 15 30 Average Average Variable Total Cost (ATC) Cost (AVC) 12.50 10.00 10.42 12.50 15.63 16.62 62.5 30.00 18.75 26.21 21.88 22.22 Based on this table, answer this: 1. How much output will this firm produce? If the price of output increases to $30, how does your answer change? 2. If the productivity of labor increases by 10% (all else equal), how much more labor will the firm hire? 3. Below what price will this firm decide to produce zero units of output? (i.e. shut down)
Chapter11: Labor Markets
Section: Chapter Questions
Problem 20SQ
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