pes16pset5sol - Principles of Economics W1105.002 Spring...

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Principles of Economics W1105.002 Spring 2016 Prof. Musatti Problem Set 5 Solutions 1. Chati and Pallavi live in Thailand and own a small fishing boat. A crew of four is needed to take the bout out fishing. The current wage paid to the four crew members is 5,000 bahts per day (a baht is the Thai unit of currency). The cost of operating the boat is 400 baht der day when fishing and zero otherwise. The cost of maintaining the boat is 800 baht per day both if fishing and otherwise. The table below summarizes the catch per day in each period during the year: Period Catch per day (Kgs) AP L = Q/L kgs per worker per day ATC = TC/Q Bahts per kg VC = 5,800 bahts Revenue Prime Fishing: 180 days 120 120/4 = 30 6,200/120 =51.66 9,600 Month 7: 30 days 90 90/4 = 22.50 6,200/90 =68.88 7,200 Month 8: 30 days 70 70/4 = 17.5 6,200/70 =88.57 5,600 Rest of the year 40 40/4 = 10 6,200/40 = 155 3,200 The price of fish in Thailand is stable at 80 baht per kilogram. a. What is the average product of labor in the different months? b. What is the average total cost of production in the different periods? And the average variable cost?
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