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Unformatted text preview: PAM 2000: Section Handout 6
TA : Romita Mukherjee March 10, 2009
———————————————————————————————— (I) Suppose a ﬁrm employs labor as the only variable input. All workers are paid $20 per day. Output per day (a) and the variable costs are shown in the table below. Complete the table, showing labor, average variable cost, and marginal cost for the ﬁrst 8 units of output. Draw a graph showing average and marginal cost. (II) True or False, explain your answer: “I paid $25 for the materials to make these ﬂower arrangements, and sold them at the craft fair for $25, so I just broke even.” (III) If input prices are w = 3, and r = 2, and q = 10KL, what is the least cost input combination required to produce 60 units of output? How would input usage change if output is increased to 240 units? Sketch the solutions on a graph. (IV) Multiple Choice 1 (1) Suppose the total cost of producing Tshirts can be represented as T C = 50 + 2q . The average cost of the 5th Tshirt is (a) (b) (c) (d) 2 10 12 60 (2) Suppose the total cost of producing Tshirts can be represented as T C = 50 + 2q . The marginal cost of the 5th Tshirt is (a) (b) (c) (d) 2 12 52 60 (3) If an isocost line crosses the isoquant twice, a cost minimizing ﬁrm will (a) use a diﬀerent isocost line to select the bundle of inputs. (b) use the input bundle associated with the intersection on the higher point of the isoquant. (c) use the input bundle associated with the intersection on the lower point of the isoquant. (d) Both B and C 2 ...
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 Spring '07
 EVANS,T.
 TA, $20, $25, Romita Mukherjee

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