Let us consider the cost implications of the short-run production schedule from assignment number 7, where capital was fixed at 2 units of capital. Labor: 0 1 2 3 4 5 6 7 8 9 Output: 0 6 24 60 120 170 210 240 260 270 In this scenario, since we only have two inputs (Capital and Labor), and since the amount of capital is fixed, the cost of total cost capital would also be Total Fixed Cost (TFC) and since labor is variable, the total cost of labor would be Total Variable Cost (TVC). In that context, assume that the cost of capital is $40 per unit per period, while the cost of labor (or wage rate) is also $30 per unit of labor per period. Also, use this information to then set up another diagram showing the firm's short run marginal cost (MC), average total cost (ATC), and average variable cost (AVC), with output on the horizontal axis (For the marginal cost, remember that when you graph marginal values you should always put them in the middle of the horizontal range that they are calculated over).
Let us consider the cost implications of the short-run production schedule from assignment number 7, where capital was fixed at 2 units of capital.
|
Labor: |
0 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
|
Output: |
0 |
6 |
24 |
60 |
120 |
170 |
210 |
240 |
260 |
270 |
In this scenario, since we only have two inputs (Capital and Labor), and since the amount of capital is fixed, the cost of total cost capital would also be Total Fixed Cost (TFC) and since labor is variable, the total cost of labor would be Total Variable Cost (TVC). In that context, assume that the cost of capital is $40 per unit per period, while the cost of labor (or wage rate) is also $30 per unit of labor per period.
Also, use this information to then set up another diagram showing the firm's short run marginal cost (MC),
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