Answered: Consider a competitive, price-taking…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Consider a competitive, price-taking firm that employs only one variable input, labor, to produce a product that sells for $14 per unit. The wage rate is $24 per unit of labor and total fixed costs are $500. Fill in the blanks in each column of this table as instructed by the questions below:

a-Compute marginal and average revenue products and fill in the blanks in
columns 4 and 6. The sixth unit of labor __________________ (increases,
decreases) _______________ (total, marginal) revenue by $__________.
Decreasing labor usage from three to two units _______________ (increases,
decreases) _______________ (total, marginal) revenue by $___________.

b-Compute marginal cost and fill in the blanks in column 7. At first, marginal
cost ___________ (rises, falls) as marginal product rises, then marginal cost
_____________ (rises, falls) as marginal product falls.

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5.
Columns 1–8 in your table should look like this:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Marginal
Product
Marginal
Revenue
Product
Average
Revenue
Product
Units of
Average
Product
Marginal
Cost
Profit when
Labor
Output
TFC = $500
XX
XX
XX
XX
XX
-500
1
8
8
112
8
112
3
-412
2
20
12
168
10
140
2
-268
3
34
14
196
11.33
158.62
1.71
-96
4
45
11
154
11.25
157.5
2.18
34
53
8
112
10.6
148.4
3
122
58
70
9.67
135.38
4.80
168
7
61
3
42
8.71
121.94
8
186
8
63
28
7.87
110.18
12
190
9.
64
1
14
7.11
99.55
24
180
10
62
-2
-28
6.2
86.8
XX
128
17:58
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G x 4) ENG
11-03-2022
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