
Subpart (a):
Calculate marginal product.
Subpart (a):

Explanation of Solution
Table -1 shows the data of hours spent for fishing and the quantity of fish caught.
Table -1
Workers | Output | Marginal product | Total cost |
| Marginal cost |
0 | 0 | ||||
1 | 20 | ||||
2 | 50 | ||||
3 | 90 | ||||
4 | 120 | ||||
5 | 140 | ||||
6 | 150 | ||||
7 | 155 |
Marginal product can be calculated by using the following formula:
Substitute the respective values in equation (1) to calculate the marginal product for 1 worker.
Thus, the value of marginal product for 1 hour is $20.
Table - 2 shows the value of marginal product that is obtained by using equation (1), above.
Table - 2
Workers | Output | Marginal product |
0 | 0 | - |
1 | 20 | 20 |
2 | 50 | 30 |
3 | 90 | 40 |
4 | 120 | 30 |
5 | 140 | 20 |
6 | 150 | 10 |
7 | 155 | 5 |
Concept introduction:
Marginal product: Marginal product refers to an additional product in the total product due to a change in one unit of labor.
Subpart (b):
Calculate Total cost.
Subpart (b):

Explanation of Solution
Total cost can be calculated by using the following formula:
Substitute the respective values in equation (2) to calculate the total cost for 0 workers.
Thus, the value of total cost for 1 worker is $200
Table - 3 shows the value of total cost that can be obtained by using equation (2).
Table - 3
Workers | Output | Marginal product | Total cost |
0 | 0 | - | 200 |
1 | 20 | 20 | 300 |
2 | 50 | 30 | 400 |
3 | 90 | 40 | 500 |
4 | 120 | 30 | 600 |
5 | 140 | 20 | 700 |
6 | 150 | 10 | 800 |
7 | 155 | 5 | 900 |
Concept introduction:
Total cost: Total cost refers to the total expenses obtained in reaching a particular level of goods and services.
Subpart (c):
Calculate average total cost.
Subpart (c):

Explanation of Solution
Average total cost can be calculated by using the following formula:
Substitute the respective value in equation (3) to calculate the average total cost for quantity 1:
Thus, the average total cost for quantity 1 is $15
Table - 4 shows the value of average total cost that is obtained by using equation (3).
Table - 4
Workers | Output | Marginal product | Total cost | Average total cost | Marginal cost |
0 | 0 | - | 200 | - | |
1 | 20 | 20 | 300 | 15 | |
2 | 50 | 30 | 400 | 8 | |
3 | 90 | 40 | 500 | 5.56 | |
4 | 120 | 30 | 600 | 5 | |
5 | 140 | 20 | 700 | 5 | |
6 | 150 | 10 | 800 | 5.33 | |
7 | 155 | 5 | 900 | 5.81 |
Concept introduction:
Average total cost: Average total cost refers to the cost per unit. Initially, average total cost will decline as fixed costs are spread over a larger number of units. However, the curve will go up when the marginal cost increases.
Subpart (d):
Calculate marginal cost.
Subpart (d):

Explanation of Solution
Marginal cost can be calculated by using the following formula:
Substitute the respective values in equation (1) to calculate the marginal cost of 1 quantity.
Thus, the value of marginal cost is $5
Table - 5 shows the value of marginal cost that obtained by using equation (4).
Table -5
Workers | Output | Marginal product | Total cost | Average total cost | Marginal cost |
0 | 0 | - | 200 | - | - |
1 | 20 | 20 | 300 | 15 | 5 |
2 | 50 | 30 | 400 | 8 | 3.33 |
3 | 90 | 40 | 500 | 5.56 | 2.5 |
4 | 120 | 30 | 600 | 5 | 3.33 |
5 | 140 | 20 | 700 | 5 | 5 |
6 | 150 | 10 | 800 | 5.33 | 10 |
7 | 155 | 5 | 900 | 5.81 | 20 |
Concept introduction:
Marginal cost: The marginal cost refers to the amount of the additional cost incurred in the process of increasing one more unit of output.
Subpart (e):
Relationship between marginal product and marginal cost.
Subpart (e):

Explanation of Solution
From Table - 5, the relationship is when the marginal product is increasing, the marginal cost is decreasing, and vice versa.
Concept introduction:
Marginal cost: The marginal cost refers to the amount of the additional cost incurred in the process of increasing one more unit of output.
Marginal product: Marginal product refers to an additional product in the total product due to a change in one unit of labor.
Subpart (f):
Relationship between average cost and marginal cost.
Subpart (f):

Explanation of Solution
When the marginal cost is greater than the average total cost, then the average cost will increase and the cost of the last unit of output produced pushes the average cost up. If the marginal cost is less than the average total cost, then the average total cost is decreasing and the cost of the last unit of output produced pulls the average cost down.
Concept introduction:
Marginal cost: The marginal cost refers to the amount of the additional cost incurred in the process of increasing one more unit of output.
Average total cost: Average total cost refers to the cost per unit. Initially, average total cost will decline as fixed costs are spread over a larger number of units. However, the curve will go up when the marginal cost increases.
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Chapter 12 Solutions
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