Average Product and Average Variable Cost > At Adam's AAA Accounting, labor (L) is the only variable input. The output (Q) is accounting services. Adam pays workers a wage of w = $20 per hour. On average, Adam's firm produces 16 units of output per worker per hour. Find the average variable cost of accounting services. Livariable AUC: Va AVC = 1-lo per uorker

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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8. Average Product and Average Variable Cost
> At Adam's AAA Accounting, labor (L) is the only variable input. The output (Q) is
accounting services. Adam pays workers a wage of w = $20 per hour. On
average, Adam's firm produces 16 units of output per worker per hour. Find the
average variable cost of accounting services.
Livaviable
AUC: Va
Q :
AVC =
1:lo per uorker
9. Cost Minimization and Economies of Scale
- The production function for gadgets is: Q = Q(L, G) = L½ + G½
The price of L is w = $2. The price of G is r $3. Total cost is:
C = 2L + 3G
- In this problem, first check for returns to scale.
> Then find expressions for the cost-minimizing input levels (L*, G*) as functions of
a target quantity of output (Qo).
> Then find L* & G* for two different target levels of output.
URc to ccale
Transcribed Image Text:11 8. Average Product and Average Variable Cost > At Adam's AAA Accounting, labor (L) is the only variable input. The output (Q) is accounting services. Adam pays workers a wage of w = $20 per hour. On average, Adam's firm produces 16 units of output per worker per hour. Find the average variable cost of accounting services. Livaviable AUC: Va Q : AVC = 1:lo per uorker 9. Cost Minimization and Economies of Scale - The production function for gadgets is: Q = Q(L, G) = L½ + G½ The price of L is w = $2. The price of G is r $3. Total cost is: C = 2L + 3G - In this problem, first check for returns to scale. > Then find expressions for the cost-minimizing input levels (L*, G*) as functions of a target quantity of output (Qo). > Then find L* & G* for two different target levels of output. URc to ccale
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