Eco 550

Strayer University - Alexandria Campus

Managerial Economics and Globalization (Eco 550).

Presented to: Dr. Edward Creppy

Exercise 2

Instructions:

1) What resources can a firm change in the short run? In the long run?

In the short run, the firm can change its variable inputs such as labor. The firm cannot change its fixed inputs, such as its capital stock. The inputs the firm cannot change are called its plant.

In the long run, the firm can change all of its inputs. Indeed, the long run is defined as the period of time long enough so that the firm can change all of its inputs.

2) What does the average product of labor equal?

The average product of labor equals the total product or the total output divided by the quantity of labor.

AVL = QUANTITY / LABOR

Quantity of labor Total product

(workers) (lawns mowed per day)

0 0

1 3

2 8

3 15

4 20

5 21

3) The above table has the total product schedule for Jesse's Lawn Service.

a. In the figure, label the axes and then graph the total product curve.

Total Product (lawns mowed per day)

25

20

15

10

5

0 1 2 3 4 5

Quantity of Labor

b. Find the average product for the different amounts of employment.

The average product when one worker is employed is three lawns mowed per day, when two workers are employed, it is four lawns per day; when three workers are employed, it is five lawns per day; when four workers are employed it is five lawns per day and when five workers are employed, it is 4.2 lawns per...