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Behind the Supply Curve:
Inputs and Costs
chapter
8
1.
Marty’s Frozen Yogurt is a small shop that sells cups of frozen yogurt in a university town.
Marty owns three frozenyogurt machines. His other inputs are refrigerators, frozenyogurt
mix, cups, sprinkle toppings, and, of course, workers. He estimates that his daily produc
tion function when he varies the number of workers employed (and at the same time, of
course, yogurt mix, cups, and so on) is as shown in the accompanying table.
PROBLEMS
Quantity of labor
Quantity of frozen
(workers)
yogurt (cups)
00
1
110
2
200
3
270
4
300
5
320
6
330
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View Full Documenta.
What are the fixed inputs and variable inputs in the production of cups of frozen
yogurt?
b.
Draw the total product curve. Put the quantity of labor on the horizontal axis and the
quantity of frozen yogurt on the vertical axis.
c.
What is the marginal product of the first worker? The second worker? The third work
er? Why does marginal product decline as the number of workers increases?
2.
The production function for Marty’s Frozen Yogurt is given in Problem 1. Marty pays each
of his workers $80 per day. The cost of his other variable inputs is $0.50 per cup of yogurt.
His fixed cost is $100 per day.
a.
What is Marty’s variable cost and total cost when he produces 110 cups of yogurt? 200
cups? Calculate variable and total cost for every level of output given in Problem 1.
Draw Marty’s variable cost curve. On the same diagram, draw his total cost curve.
c.
What is the marginal cost per cup for the first 110 cups of yogurt? For the next 90
cups? Calculate the marginal cost for all remaining levels of output.
3.
The production function for Marty’s Frozen Yogurt is given in Problem 1. The costs are
given in Problem 2.
a.
For each of the given levels of output, calculate the average fixed cost (
AFC
), average
variable cost (
AVC
), and average total cost (
ATC
) per cup of frozen yogurt.
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 Fall '06
 WISSINK
 Economics, Economics of production, average total cost, Marty

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