Assignment:
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1. The following table shows data for a simple production function.
Capital (K) Labor (L) Total Average Marginal
Product (TP) Product (AP) Product (MP)
10 0 0 - -
10 1 5
10 2 15
10 3 30
10 4 50
10 5 75
10 6 85
10 7 90
10 8 92
10 9 92
10 10 90
a. From the information in the table, calculate marginal and average products.
b. Graph the three functions (put total product on one graph and marginal and average products on another).
c. For what range of output does this function have diminishing marginal returns?
d. At what output is average product maximized?
5. The following table shows data for the simple production function used in Question 1. Capital costs this firm $20 per unit, and labor costs $10 per worker.
K L TP TFC TVC TC AFC AVC ATC MC
10 0 0
10 1 5
10 2 15
10 3 30
10 4 50
10 5 75
10 6 85
10 7 90
10 8 92
a. From the information in the table, calculate total fixed cost (TFC), total variable cost (TVC),total cost (TC), average fixed cost (AFC), average variable cost (AVC), average total cost (ATC), and marginal cost (MC).
b. Graph your results, putting TFC, TVC, and TC on one graph and AFC, AVC, ATC, and MC on another.
c. At what point is average total cost minimized?
At what point is average variable cost minimized?