202 S08 PS3

# 202 S08 PS3 - Economics 202 Problem Set 3 Spring 2008 1....

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Economics 202 Problem Set 3 Spring 2008 1. Complete the production and cost charts used in class. That is, fill in all of the figures for APP, MPP, TVC, TFC, AVC, AFC, AC, and MC. At what outputs are APP and MPP at their maximums? At what outputs are AVC and MC at their minimums? 2. Rederive AVC, AFC, ATC, and MC, supposing that w = \$100 instead of \$50 as was assumed in class. 3. Use the following TP L schedule to answer the questions that follow. Suppose that w = \$10 and that TFC = \$20. L 0 1 2 3 4 5 Q 0 5 12 17 20 21 a) What is the MP L schedule? Does the Law of Diminishing Marginal Returns hold? b) Please provide the schedules AFC, AVC, and MC. c) Suppose now that labor productivity doubles so that the new TP L is L 0 1 2 3 4 5 Q 0 10 24 34 40 42 Re-derive the MP L , AFC, AVC, and MC schedules. Explain why the cost curves shifted as they did. 4. Suppose that a firm’s total variable cost function is given by TVC = Q 2 , its marginal cost function is given by MC = 2Q, and its total fixed costs are equal to \$49.

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## This note was uploaded on 09/08/2010 for the course ECON 202 taught by Professor Zelder during the Spring '07 term at Northwestern.

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202 S08 PS3 - Economics 202 Problem Set 3 Spring 2008 1....

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