Posted: December 21st, 2015

Capital costs this company $20 per unit, and labor costs $10 per worker.

K L TP TFC

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

- Calculate TFC, TVC, TC, AFC, AVC, ATC and MC
- Graph your results, putting TFC, TVC and TC on one graphand AFC, AVC, ATC and MC on another.
- At what point is average total cost minimized? At what point is average variable cost minimized?

TFC=total fixed cost

TVC=total variable cost

TC=total cost

AFC=average fixed cost

AVC=average variable cost

ATC= average total cost

MC=marginal cost

The following table shows data for a simple function

Capital (K) Labor (L) Total Product (TP)

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

- From the information in the table, calculate marginal and average products

- Graph the three functions (put total product on one graph and marginal and average products on another).

- For what range of output does this function have diminishing marginal returns?

- At what output is average product maximized?

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