The production function for a firm is: q=-0.6L3+18L2K+10L where q is the amount of output, L is the number of labor hours per week, and K is the amount of capital. The wage is w = $100 and the rental rate is r = $800 per time period. aUsing Excel, calculate the total short-run output, q(L), for L = 0, 1, 2, …, 20, given that capital is fixed in the short run and K = 1. Also calculate the average product of labor; APL, and the marginal product of labor, MPL. bFor each quantity of labor in (a), calculate the variable cost, VC; the total cost, C; the average variable cost, AVC; the average cost , AC; and the marginal cost, MC. Using excel, draw the AVC, AC, and MC curves in a diagram. Hint: you will not be able to solve the total product curve for L as a function of output. So, instead construct a table, See the headings. Use this definition ΔTC/Δq qLMPLAPLTVCTFCTCMCAVCAFCATCrwStartStep0 011 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Production function q = -0.6L3+18L2K+10L In short-run, the capital K is fixed at K=1 So short-run…

Answered: The production function for a firm is:…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The production function for a firm is:

q=-0.6L³+18L²K+10L where q is the amount of output, L is the number of labor hours per week, and K is the amount of capital. The wage is w = $100 and the rental rate is r = $800 per time period.

Using Excel, calculate the total short-run output, q(L), for L = 0, 1, 2, …, 20, given that capital is fixed in the short run and K = 1. Also calculate the average product of labor; APL, and the marginal product of labor, MPL.

For each quantity of labor in (a), calculate the variable cost, VC; the total cost, C; the average variable cost, AVC; the average cost , AC; and the marginal cost, MC. Using excel, draw the AVC, AC, and MC curves in a diagram.

Hint: you will not be able to solve the total product curve for L as a function of output. So, instead construct a table, See the headings.

							Use this definition
							ΔTC/Δq
q	L	MPL	APL	TVC	TFC	TC	MC	AVC	AFC	ATC	r	w	Start	Step
0													0	1
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
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20

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