Econ 101-homework4 - Econ 101 Homework 4 Fall 2007 Due in...

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Econ 101 Homework 4 Fall 2007 Due 11/12/2007 in lecture Directions: The homework will be collected in a box before the lecture. Please place your name , TA name and section number on top of the homework (legibly). Make sure you write your name as it appears on your ID so that you can receive the correct grade. Please remember the section number for the section you are registered, because you will need that number when you submit exams and homework. Late homework will not be accepted so make plans ahead of time. Good luck! 1. Production and Costs Complete the following table. The total fixed cost is $450. The firm is a price-taker in the labor market, so the wage rate is constant. Quantity Labor FC VC TC AFC AVC ATC MC MPL 0 0 -- -- -- -- -- 5 1 540 20 2 45 3 60 4 70 5 75 6 Use the information you calculated in the table above to answer the following questions. a. At what level of output and labor usage does marginal cost attain its minimum? b. At what level of output and labor usage is ATC at its minimum? c. At what level of labor usage does the law of diminishing returns first occur? d. When output is equal to zero units, why does the firm still incur costs? Explain your answer.
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e. As output increases, why does AVC first decrease, but then eventually increase?
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