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Question : 21) If average total cost falling marginal cost must also : 1245237

Economics

 

 

21) If average total cost is falling marginal cost must also be falling.

 

22) In the short run, if average product is at its maximum, then average variable cost is at its minimum.

 

23) Describe the relationship between marginal cost and average total cost.

 

24) Is it possible for average total cost to be decreasing over a range of output where marginal cost is increasing? Briefly explain.

 

25) Explain why the marginal cost of production must increase if the marginal product of a variable resource is decreasing.

Table 8-5

Number of Workers

Output (boxes)

Marginal Product of Labor

Office Rent (dollars)

Labor Cost (dollars)

Total Cost (dollars)

0

   0

—

 

 

 

1

220

 

400

  200

 

2

 

250

 

 

  800

3

680

 

 

 

 

4

 

160

 

 

1,200

5

940

 

 

1,000

 

6

980

 

 

 

1,600

 

26) Refer to Table 8-5. Suzette’s Fancy Packaging subcontracts with Sunshineland Pecans to box dried fruit and nuts for Suzette’s mail order business. Suzette rents space for her factory for $400 a week in a nearby strip mall. She can hire temporary workers for $200 a week. Table 8-5 above shows her output and cost data. Use the table to answer questions a-e.

a.Complete the table.

b.In the last week of summer Suzette closes her business to go on a family vacation. What are her costs during that week?

c.In one week Suzette exactly breaks even. If her revenue for the week is $1,200, how many boxes of fruit and nuts did she produce?

d.Judging from the marginal product of labor data, would you say that Suzette had to settle for increasingly unproductive workers? Explain your answer.

e.Suzette has received an order for 1,500 boxes of nuts per week for the next 3 months. If she expects the trend in the marginal product of labor will continue in the same direction, what do you think she should do? Should she not commit until she can move to a larger space or should she just hire more workers? Explain your answer.

 

Table 8-6

Quantity of workers

Quantity of foot massages per day

Fixed cost

Variable cost

Total cost

Average total cost

Marginal cost

0

  0

 

 

 

 

 

1

10

 

 

 

 

 

2

25

 

 

 

 

 

3

45

 

 

 

 

 

4

60

 

 

 

 

 

5

70

 

 

 

 

 

 

27) Refer to Table 8-6. Alicia Gregory owns a foot massage business. She leases 4 computer-controlled massage booths, for which she pays $125 per day. She cannot increase the number machines she leases without giving the manufacturer 3 months notice. She can hire as many workers as she wants at a cost of $75 per day per worker. These are the only two inputs she uses in her business. Use this information to fill in the columns in the above table.

 

 

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