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ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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# Understanding the Relationship Between Marginal Product and Marginal Cost ## Context Simone's Burrito Stand is a small restaurant that sells burritos. The business model involves fixed inputs like grills and variable inputs such as labor. The cost of labor is $50 per worker each day, with total fixed costs of $50 per day. Below is a breakdown of the labor input and total cost schedule, along with the objectives of calculating marginal product and marginal cost. ## Table Overview The table in the image includes several columns: - **Labor Input (Number of Workers):** Ranges from 1 to 5. - **Total Output (Burritos per day):** Varies based on the number of workers. - **Marginal Product (MP):** Calculated by the change in total output with the addition of one more worker. - **Total Cost (Dollars per day):** Fixed cost plus variable cost (number of workers multiplied by $50). - **Marginal Cost (MC):** Calculated by the change in total cost divided by the change in quantity of output. ### Example Calculation - To calculate the **Marginal Product**, subtract the total output of the preceding labor input from the total output of the current labor input. - To calculate the **Marginal Cost**, divide the increase in total cost by the increase in output (marginal product). ## Exercises Fill in the blanks to complete the Marginal Product and Marginal Cost columns, and analyze the prompts regarding marginal returns to labor and marginal cost trends. ### Questions 1. When hiring its third worker, Simone's Burrito Stand faces ________ marginal returns to labor. 2. Over the range of workers for which the marginal product is decreasing, Simone's Burrito Stand faces ________ marginal cost. ### Conclusion Understanding these concepts helps in optimizing production and cost management in business settings.
Transcribed Image Text:# Understanding the Relationship Between Marginal Product and Marginal Cost ## Context Simone's Burrito Stand is a small restaurant that sells burritos. The business model involves fixed inputs like grills and variable inputs such as labor. The cost of labor is $50 per worker each day, with total fixed costs of $50 per day. Below is a breakdown of the labor input and total cost schedule, along with the objectives of calculating marginal product and marginal cost. ## Table Overview The table in the image includes several columns: - **Labor Input (Number of Workers):** Ranges from 1 to 5. - **Total Output (Burritos per day):** Varies based on the number of workers. - **Marginal Product (MP):** Calculated by the change in total output with the addition of one more worker. - **Total Cost (Dollars per day):** Fixed cost plus variable cost (number of workers multiplied by $50). - **Marginal Cost (MC):** Calculated by the change in total cost divided by the change in quantity of output. ### Example Calculation - To calculate the **Marginal Product**, subtract the total output of the preceding labor input from the total output of the current labor input. - To calculate the **Marginal Cost**, divide the increase in total cost by the increase in output (marginal product). ## Exercises Fill in the blanks to complete the Marginal Product and Marginal Cost columns, and analyze the prompts regarding marginal returns to labor and marginal cost trends. ### Questions 1. When hiring its third worker, Simone's Burrito Stand faces ________ marginal returns to labor. 2. Over the range of workers for which the marginal product is decreasing, Simone's Burrito Stand faces ________ marginal cost. ### Conclusion Understanding these concepts helps in optimizing production and cost management in business settings.
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Use the following data to answer the question below. Malaysia data: The annual growth rate of capital stock = 7% The annual growth rate of labor force = 2% The labor's share of income = 0.60 The capital's share of income = 0.40 The annual growth rate of output = 5% From the above data and the growth accounting, what is the annual growth rate of Malaysia's total factor productivity? er 1% ed 9% 10% -1%
Transcribed Image Text:Use the following data to answer the question below. Malaysia data: The annual growth rate of capital stock = 7% The annual growth rate of labor force = 2% The labor's share of income = 0.60 The capital's share of income = 0.40 The annual growth rate of output = 5% From the above data and the growth accounting, what is the annual growth rate of Malaysia's total factor productivity? er 1% ed 9% 10% -1%
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