(A) With P = 20, W = 25 and TFC = 500:Labor Output(Q)(L)51025355060102560708090MarginalPhysicalProduct ofAVC=VC/QATC=TC/QLabour(MPPL)234221AveragePhysical CostProduct of (TC) (VC)Labour(APPL)22.52.421.61.5MPPL = Change in Q / Change in LAPPL=Q/LTC = TFC + VCVC=W* LMC = Change in TC / Change in QTotal Variable Marginal AverageCostVariable625750112518351750200012525062587512501500Cost(MC)15106101530AverageTotalCostCost(AVC) (ATC)12.5010.0010.4212.5015.6316.6262.530.0018.7526.2121.8822.22Based 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)

Industrial economics is the study and appraisal of business financial issues utilising abstract…

(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)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Isocost and Isoprofit Curve Analysis

An isocost curve in the production theory that is a crucial part of economics depicts different combinations of factor inputs at a given market cost. In other words, this shows all the combinations of production factors that cost the same for the firm to employ. Usually, this can be depicted as a downward sloping straight line when the firms act as the price-takers in the factor markets. The slope of this mainly depicts the relative prices of different production factors.

Question

(A) With P = 20, W = 25 and TFC = 500:
Labor Output
(Q)
(L)
5
10
25
35
50
60
10
25
60
70
80
90
Marginal
Physical
Product of
AVC=VC/Q
ATC=TC/Q
Labour
(MPPL)
2
3
4
2
2
1
Average
Physical Cost
Product of (TC) (VC)
Labour
(APPL)
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
Total Variable Marginal Average
Cost
Variable
625
750
1125
1835
1750
2000
125
250
625
875
1250
1500
Cost
(MC)
15
10
6
10
15
30
Average
Total
Cost
Cost
(AVC) (ATC)
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)

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