Answer to Question #39732 in Macroeconomics for Sarah

Question

2. 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

a. Determine the average and marginal products of labour.

b. Provide rough graphs of the total product, average product and marginal product curves and explain why they behave in the way they do. Be sure to label your axes correctly.

c. 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.

d. 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.

Answer 1

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