Question

A firm produces the following units of output, Q, by hiring a fixed quantity of
capital, K, and labour, L, as follows:
L: 8, 16, 24, 32, 40, 48, 56, 64, 72, 80
Q: 16, 36, 65, 97, 137, 177, 209. 233, 249, 257
APL: 0.50, 0.44, 0.37, 0.33, 0.29, 0.27, 0.27, 0.27, 0.29, 0.31
MPL: - , 0.40, 0.28, 0.25, 0.20, 0.20, 0.25, 0.33 , 0.55 , 1.00

a. Assuming that the cost of capital is $1,000 and labour costs $10.00 per hour,
determine the total variable cost, average variable cost and the marginal cost
of the firm for the output levels given above.

b. Provide rough graphs of the TVC, AVC and MC curves and compare their
behaviour with the product curves in part b. Be sure to label your axes
correctly.