cost3a - Why? At output rates above 21 boats per week? Why?...

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Additional Problem 3 Answers : Production Costs The total product schedule of Rubber Duckies, Inc., a firm making rubber boats, is described by the following : L Q=TP MP AP TC TVC TFC ATC AVC AFC MC 1 1 1 1 $10,400 $400 $10,000 $10,400 $400 $10,000 $400 2 3 2 1.5 10,800 800 10,000 3,600 267 3,333 200 3 6 3 2 11,200 1,200 10,000 1,867 200 1,667 133 4 10 4 2.5 11,600 1,600 10,000 1,160 160 1,000 100 5 15 5 3 12,000 2,000 10,000 800 133 667 80 6 21 6 3.5 12,400 2,400 10,000 590 114 476 67 7 26 5 3.7 12,800 2,800 10,000 492 108 385 80 8 30 4 3.8 13,200 3,200 10,000 440 107 383 100 9 33 3 3.7 13,600 3,600 10,000 412 109 303 133 10 35 2 3.5 14,000 4,000 10,000 400 114 286 200 a) Calculate the marginal product and average product. What is the relationship between these functions at output rates below 21 boats a week?
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Unformatted text preview: Why? At output rates above 21 boats per week? Why? (Draw a graph to illustrate your answer). At Q < 21 MP > AP MP is increasing and brings the AP up. At Q > 21 MP < AP MP is decreasing and brings the AP down. b) Now suppose the price of labor is $400 a week, and the total fixed cost is $10,000 a week. Calculate the firm's total cost, total variable cost, total fixed cost, average total cost, average variable cost, average fixed cost, and marginal cost. See above entries. c) Suppose that total fixed cost increases to $11,000 per week. How will this affect the firm's average total cost, average fixed cost, average variable cost, and marginal cost? Explain thoroughly. ATC increases due to the increasing AFC. No change in AVC. No change in MC....
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This note was uploaded on 10/26/2009 for the course ECON 180-004-20 taught by Professor Bresnock during the Fall '09 term at UCLA.

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