Microeconomics Textbook Questions

Question One

a.) Calculate Marginal and Average Products

Capital (K) Labor (L) Total Product (TP) Average Product (AP) Marginal Product (MP)

10 0 0 0.00 0.00

10 1 5 5.00 5.00

10 2 15 7.50 10.00

10 3 30 10.00 15.00

10 4 50 12.50 20.00

10 5 75 15.00 25.00

10 6 85 14.17 10.00

10 7 90 12.86 5.00

10 8 92 11.50 2.00

10 9 92 10.22 0.00

10 10 90 9.00 -2.00

b.) Total Product, Marginal and Average Products Curve

c.) Diminishing Marginal Returns

The range of output exhibiting diminishing marginal returns begins when five units of labor was employed. Marginal Product continues to decline as additional units of labor was employed and eventually turned negative at ten units of labor employed.

d.) Maximum Average Product

Average Product was maximized when five units of labor was employed

Question Three

Cost Function a.) Implicit/Explicit Cost b.) Fixed/Variable Cost

Lease on the building Explicit Fixed

Inventory Explicit Variable

Wages for two workers Explicit Fixed assuming salaried, not hourly paid

Electricity Explicit Variable

Insurance Explicit Fixed

Question Five

a.) TFC, TVC, TC, AFC, AVC, ATC, AND MC

(K) (L) (TP) (TFC) (TVC) (TC) (AFC) (AVC) (ATC) (MC)

10 0 0 200.00 0.00 200.00 0.00 0.00 0.00 0.00

10 1 5 200.00 10.00 210.00 40.00 2.00 42.00 2.00

10 2 15 200.00 20.00 220.00 13.33 1.33 14.67 1.00

10 3 30 200.00 30.00 230.00 6.67 1.00 7.67 0.67

10 4 50 200.00 40.00 240.00 4.00 0.80 4.80 0.50

10 5 75 200.00 50.00 250.00 2.67 0.67 3.33 0.40

10 6 85 200.00 60.00 260.00 2.35 0.71 3.06 1.00

10 7 90 200.00 70.00 270.00 2.22 0.78 3.00 2.00

10 8 92 200.00 80.00 280.00 2.17 0.87 3.04 5.00

10 9 92 200.00 90.00 290.00 2.17 0.98 3.15 0.00

10 10 90 200.00 100.00 300.00 2.22 1.11 3.33 -5.00

b.) TFC, TVC, TC, AFC, AVC, ATC, AND MC Curves

c.) Minimum Average Total Cost and Minimum Average Variable Cost

Average Total Cost is minimized when 90 units was produced with seven units of labor...