Solution
David answered on
Dec 26 2021
1
1. The following TABLE contains production data of a company in the short term.
The first column consists of the number of workers (variable factor) employed
while the second column contains the Total Product (TP) co
esponding to each
level of employment. Calculate the Average Product of Labor (AP), and the
Marginal Product of Labor (MP) for each level of employment, and then draw a
single diagram (using graph paper) with both (AP & MP).
WORK TP AP MP
1 4 4
2 9 4.5 5
3 15 5 6
4 21 5.25 6
5 26 5.2 5
6 30 5 4
7 33 4.7143 3
8 35 4.375 2
9 36 4 1
2
Average product of labor is calculated by dividing the total product of labor with the
number of labor employed to produce that level of output.
Marginal product of labor is calculated by taking the difference of two consecutive total
product of labor and represents the addition to the total output with addition to each unit
of labor employed. When MP is rising, AP also increases. At their intersection point, AP
eaches at its máximum point. When MP falls, AP also falls and lies above MP curve. It
means that the rate of change in MP is faster than the rate of change in AP.
2. The Fixed Cost of a company is equivalent to about $ 360,000. Construct a TABLE
that includes the Total Fixed Cost and the Average Fixed Cost of the company for each of
the indicated quantities of 1 to 6 product units. Then, on graph paper, draw the
co
esponding Curves of Total Fixed Cost and Average Fixed Cost.
0
1
2
3
4
5
6
7
1 2 3 4 5 6 7 8 9
A
P
M
P
WORK UNITS
AP
MP
3
QUANTITY VARIABLE COST.
1 $40,000
2 $80,000
3 $120,000
4 $176,000
5 $240,000
6 $360,000
Answer –
QUANTITY
FIXED
COST
AVERAGE
FIXED
COST
1 3,60,000 360000
2 3,60,000 180000
3 3,60,000 120000
4 3,60,000 90000
5 3,60,000 72000
6 3,60,000 60000
Fixed cost remains same at all levels of output and it does not change with each level of
output. That is why, it is a straight horizontal line at $360,000 for all levels of output.
4
Average fixed cost is calculated by...