problemSet05

# problemSet05 - 1 ECONOMICS 100 PROBLEM SET #5 (Theory of...

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PROBLEM SET #5 (Theory of the Firm and Short Run Perfect Competition) 1. Speedy Taxi Service The Speedy Taxi Service ("Save your gas, use ours") produces a single output, taxi rides, with one fixed input (seven taxis) and one variable input (drivers). Fred Flat, owner of Speedy Taxi, notices that initially, as he hires more full-time drivers, total output goes up; but when he gets to the point where his drivers are not always fully occupied (some hours there are more drivers than taxis around), his drivers start playing poker and neglecting calls and total output falls. 1.1 Fred wants to know what the marginal productivity (MP) of his drivers is. Calculate this for him and record your figures in the table below. Also, while you are at it, fill in the average productivity of drivers (AP) column. Drivers TP Drivers MP Drivers AP Drivers (1) (2) (3) (4) (Total Rides Produced) 0 0 1 5 2 14 3 27 4 40 5 55 6 66 7 70 8 72 9 72 10 70 11 66 1.2 For Fred the total productivity of drivers equals total rides produced. Plot the TP, MP, and AP curves of drivers at Fred's establishment. 1

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## This note was uploaded on 08/24/2010 for the course ECO 100 taught by Professor Indart during the Fall '08 term at University of Toronto- Toronto.

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problemSet05 - 1 ECONOMICS 100 PROBLEM SET #5 (Theory of...

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