Parris_Cost_Curves_Start

Problem 7-1 q = -0.6 + 18 $100 Rental rate $800 a) b) c) 1 L q(L) VC TC 0 0.00 0.00 800.00 1 27.40 27.40 27.40 100.00 900.00 2 87.20 43.60 59.80 200.00 1,000.00 3 175.80 58.60 88.60 300.00 1,100.00 4 289.60 72.40 113.80 400.00 1,200.00 5 425.00 85.00 135.40 500.00 1,300.00 6 578.40 96.40 153.40 600.00 1,400.00 7 746.20 106.60 167.80 700.00 1,500.00 8 924.80 115.60 178.60 800.00 1,600.00 9 1,110.60 123.40 185.80 900.00 1,700.00 10 1,300.00 130.00 189.40 1,000.00 1,800.00 Use a cell reference or a single formula where appropriate in order to or type values, as you will not receive full credit for your answers. The production function for a firm is q = -0.6 L 3 + 18 L 2 K + 10 L where q is per week, and K the amount of capital. The wage is $100 and the rental rat period. L 3 Wage ( w ) Calculate the total short-run output, q ( L ), for L = 0, 1, 2, . . ., 20, Also, calculate the average product of labor, AP L , and the margin for L = 2 as q (2) - q (1), and so on for other levels of L .) For each quantity of labor in (a) , calculate the variable cost, VC ; average cost, AC ; and the marginal cost, MC . Draw the AVC, AC For each quantity of labor in (a) , calculate w/AP L and w/MP L . Exp between MC and w/MP L . Capital ( K ) AP L MP L

11 1,489.40 135.40 189.40 1,100.00 1,900.00 12 1,675.20 139.60 185.80 1,200.00 2,000.00 13 1,853.80 142.60 178.60 1,300.00 2,100.00 14 2,021.60 144.40 167.80 1,400.00 2,200.00 15 2,175.00 145.00 153.40 1,500.00 2,300.00 16 2,310.40 144.40 135.40 1,600.00 2,400.00 17 2,424.20 142.60 113.80 1,700.00 2,500.00 18 2,512.80 139.60 88.60 1,800.00 2,600.00 19 2,572.60 135.40 59.80 1,900.00 2,700.00 20 2,600.00 130.00 27.40 2,000.00 2,800.00 With a constant wage, when the average product rises, the averag With a constant wage, when the marginal product rises, the marg Use Excel to draw the AVC , AC , and MC curves in a diagram. Determine the relationships between AVC and w/AP L and betwee 0.00 500.00 1,000.00 1,500.00 2,000.00 2,500.00 -3.00 1.00 5.00 9.00 13.00 17.00 21.00 25.00 29.00 33.00 Cost Curves Output per week (q) Cost ($)

0.74 1.28 0.53 8.12 5.81 0.72 1.19 0.54 8.60 6.46 0.70 1.13 0.56 9.12 7.28 0.69 1.09 0.60 9.70 8.34 0.69 1.06 0.65 10.34 9.78 0.69 1.04 0.74 11.08 11.82 0.70 1.03 0.88 11.92 14.94 0.72 1.03 1.13 12.89 20.32 0.74 1.05 1.67 14.03 31.77 0.77 1.08 3.65 15.38 72.99 ge varable cost falls . ginal cost falls . en MC and w/MP L . 3,000.00 I14 J14 K14

Steps to P Step 1 2 3 4 5 6 7 8 9 10 11 Project D In this pro

Perform: Instructions Description: oblem, you will calculate the costs for the different number of labor hours and will determine the rela Use a cell reference or a single formula where appropriate in order to receive full credit. Do not copy answers. Start Excel. In cell D15 , by using relative and absolute cell references, calculate the total short-run output if the l to cell D35 . In cell E16 , by using relative and absolute cell references, calculate the average product of labor if th column to cell E35 . In cell F16 , by using cell references, calculate the marginal product of labor for the labor level in cel In cell G15 , by using relative and absolute cell references, calculate the variable cost if the labor leve G35 . In cell H15 , by using relative and absolute cell references, calculate the total cost if the value of the l to cell H35 . In cell I16 , by using cell references, calculate the average variable cost if the labor level is in cell C1 In cell J16 , by using cell references, calculate the average cost if the labor level is in cell C16 . Copy In cell K16 , by using cell references, calculate the marginal cost for the labor level in cell C16 as the K16 down the column to cell K35 . In cell L16 , by using relative and absolute cell references, calculate the ratio of w to AP L if the labor cell L35 . In cell M16 , by using relative and absolute cell references, calculate the ratio of w to MP L if the labo cell M35 .

Save the workbook. Close the workbook and then exit Excel. Submit the workbook as directed. In cells C39-J39 , insert a Scatter Chart for the average variable cost, the average cost, and the margi Inserting a Chart On the Insert tab, in the Charts group, click the arrow next to Insert Scatter (X,Y) or Bubble Chart an Selecting Data Series Then in Select Data Source window, delete any series created automatically. Add new series for the average variable cost curve using cells D15:D35 for the X values and cells I1 Add new series for the average cost curve using cells D15:D35 for the X values and cells J16:J35 fo Add new series for the marginal cost curve using cells D15:D35 for the X values and cells K16:K35 Edit Chart Elements Select design Style 1 for the chart. Go to the Add Chart Elements dropdown list in the Design tab of as the title for the horizontal axis and Cost ($) as the title for the vertical axis. Chart Position Set the chart height and width so the entire chart fits within cells C39-J39 . In cell L42 , determine what happens with the average variable cost when the average product rises. In cell K43 , determine what happens with the marginal cost when the marginal product rises.

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