Question

Nimbus, Inc., makes brooms and then sells them to customers. Here is the relationship between the number of workers and Nimbus's output in a given day:

Workers:

1. 0 worker
2. 1 worker
3. 2 workers
4. 3 workers
5. 4 workers
6. 5 workers
7. 6 workers
8. 7 workers

Output:

1. 0 broom
2. 20 brooms
3. 50 brooms
4. 90 brooms
5. 120 brooms
6. 140 brooms
7. 150 brooms
8. 155 brooms

a.)Marginal product / b.)Total cost / c.)Average Total cost / d.)Marginal cost:

1. ?
2. ?
3. ?
4. ?
5. ？
6. ？
7. ？
8. ？

Calculate:

a.） Find the marginal products of 1 to 8. 

b.） A worker costs $100 a day, and the firm has fixed costs of $200. Use this information to find 1to 8 for total cost. 

c.）  Find 1 to 8 for average total cost. (Recall that ATC =TC /Q.) 

d.） Now find 1 to 8 for marginal cost. (Recall that MC = ATC /AQ) 

e） Calculate the output level at minimum average total cost for Nimbus。

Answer 1

a. See table for marginal product. Marginal product rises at first then declines because of diminishing marginal product.

b.See table. It equals $200(fixed costs) plus $100 times the

number of workers

c. See table. When quantity is low average total cost declines as quantity rises; when quantity is high, average total cost rises as quantity rises

d. See table. MC rises steeply as output increases

e. See table.