Assume that a firm has a plant of fixed size and that it can vary its output only by varying the amount of labor it employs. The table below shows the relationships among the amount of labor employed, the output of the firm, the marginal product of labor, and the average product of labor. (a) Assume each unit of labor costs the firm $20. Compute the total cost of labor for each quantity of labor the firm might employ, and enter these figures in the table. (b) Now determine the marginal cost of the firm's product as the firm increases its output. Enter these figures in the table. (c) If labor is the only variable input, the total labor cost and total variable cost are equal. Find the average variable cost of the firm's product. Enter these figures in the table. (d) Describe the relationship between the marginal product of labor and the marginal cost of the firm's product. (e) Describe the relationship between the average product of labor and the average variable cost. Quantity of labor Marginal Average Total Average Total output product product of variable Marginal labor variable employed of labor cost cost cost 1 10 10 10.00 $ $. $ 2 22 12 11.00 36 14 12.00 4 48 12 12.00 58 10 11.60 66 8 11.00 7 72 10.28 8 76 4 9.50 78 2 8.66 10 78 7.80
Assume that a firm has a plant of fixed size and that it can vary its output only by varying the amount of labor it employs. The table below shows the relationships among the amount of labor employed, the output of the firm, the marginal product of labor, and the average product of labor. (a) Assume each unit of labor costs the firm $20. Compute the total cost of labor for each quantity of labor the firm might employ, and enter these figures in the table. (b) Now determine the marginal cost of the firm's product as the firm increases its output. Enter these figures in the table. (c) If labor is the only variable input, the total labor cost and total variable cost are equal. Find the average variable cost of the firm's product. Enter these figures in the table. (d) Describe the relationship between the marginal product of labor and the marginal cost of the firm's product. (e) Describe the relationship between the average product of labor and the average variable cost. Quantity of labor Marginal Average Total Average Total output product product of variable Marginal labor variable employed of labor cost cost cost 1 10 10 10.00 $ $. $ 2 22 12 11.00 36 14 12.00 4 48 12 12.00 58 10 11.60 66 8 11.00 7 72 10.28 8 76 4 9.50 78 2 8.66 10 78 7.80
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Assume that a firm has a plant of fixed size and that it can vary its output only by varying the amount of labor it
employs. The table below shows the relationships among the amount of labor employed, the output of the firm,
the marginal product of labor, and the average product of labor.
(a) Assume each unit of labor costs the firm $20. Compute the total cost of labor for each quantity of labor the
firm might employ, and enter these figures in the table.
(b) Now determine the marginal cost of the firm's product as the firm increases its output. Enter these figures
in the table.
(c) If labor is the only variable input, the total labor cost and total variable cost are equal. Find the average
variable cost of the firm's product. Enter these figures in the table.
(d) Describe the relationship between the marginal product of labor and the marginal cost of the firm's product.
(e) Describe the relationship between the average product of labor and the average variable cost.
Quantity of
labor
Marginal Average
product product of variable Marginal
of labor
Total
Average
Total
variable
employed
output
labor
cost
cost
cost
1
10
10
10.00
$.
$
2
22
12
11.00
3
36
14
12.00
4
48
12
12.00
58
10
11.60
66
11.00
7
72
6
10.28
8
76
9.50
78
2
8.66
10
78
7.80
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