1 / 5

Managerial Economics Short-Run Production

Managerial Economics Short-Run Production. Suppose that a firm is currently employing 20 workers, the only variable input, at a wage rate of $60. The average product of labor is 30, the last worker added 12 units to total output, and total fixed cost is $3,600. What is marginal cost?

consuelo-azura
Télécharger la présentation

Managerial Economics Short-Run Production

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Managerial Economics Short-Run Production Suppose that a firm is currently employing 20 workers, the only variable input, at a wage rate of $60. The average product of labor is 30, the last worker added 12 units to total output, and total fixed cost is $3,600. What is marginal cost? What is average variable cost? How much output is being produced? What is average total cost? Is average variable cost increasing, constant, or decreasing? What about average total cost? Dr. C. Chen

  2. Managerial Economics Short-Run Production Suppose that a firm is currently employing 20 workers, the only variable input, at a wage rate of $60. The average product of labor is 30, the last worker added 12 units to total output, and total fixed cost is $3,600. a. What is marginal cost? The last worker (hired at the wage of $60, TC=$60) added 12 units of output (Q =12) MC=TC/ Q = $60/12=$5 b. What is average variable cost? AVC = VC/Q = $60*20/30*20 = $2 Dr. C. Chen

  3. Managerial Economics Short-Run Production Suppose that a firm is currently employing 20 workers, the only variable input, at a wage rate of $60. The average product of labor is 30, the last worker added 12 units to total output, and total fixed cost is $3,600. c. How much output is being produced? Q = 30*20 = 600 d. What is average total cost? ATC= TC/Q = (FC+VC)/Q = ($3,600+$60*20)/600 =$8 Dr. C. Chen

  4. Managerial Economics Short-Run Production Suppose that a firm is currently employing 20 workers, the only variable input, at a wage rate of $60. The average product of labor is 30, the last worker added 12 units to total output, and total fixed cost is $3,600. e. Is average variable cost increasing, constant, or decreasing? What about average total cost? From the previous answers, we know that ATC ($8) > MC ($5) > AVC ($2). So, AVC is increasing but ATC is decreasing. On the next slide, ATC > MC > AVC occurs between Q2 and Q3. Dr. C. Chen

  5. Short Run Average & Marginal Cost Curves (Figure 8.5)

More Related