Final Review

# Final Review - Handout 4 Production Cost Analysis 1 a b...

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Handout 4: Production Cost Analysis 1. a) Complete the cost table to make it consistent with the given numbers. b) Plot the total cost functions for the range of output 0 - 10 on one diagram, and the average and marginal cost functions on another diagram. Q TC TFC TVC ATC AFC AVC MC 0 20 1 1 2 3 3 4 4 12 5 75 6 16 7 24.85 8 86 9 360 10 540

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Homework Assignment 3 (20 points) SuzeQ’s Bogie Boards’ employs the workers shown below to craft its custom surfboards. The total amount of bogie boards produced by these workers is given as the total output (TP). Labor (wor kers per wee k) Total Output (TP L ) (per week) Marginal Output (MP L ) Average Output (AP L ) Total Value Product (TVP L) Marginal Value Product (MVP L) Total Cost of Inputs (TC) Marginal Cost of Inputs (MC) Total Profit or Loss 0 0 1 40 2 100 3 140 4 170 5 190 6 200 (a) First fill in the TP L , MP L and AP L in the table above. Then draw one carefully specified graph that shows these relationships below.
(b) What is the relationship between the average product and the marginal product when SuzeQ’s produces less than 100 bogie boards? (c) What is the relationship between the average product and the marginal product when Su- zeQ’s produces more than 100 bogie boards? Now, suppose that SuzeQ’s Bogie Boards has a fixed, overhead capital cost of \$200 per week no matter how many bogie boards are produced, and that labor costs \$600 per week. (d) Fill in the TVP L , MVP L , TC, MC and Total Profit or Loss in the table on the first page. (e) Assuming the price of bogie boards is \$20 per board, if the SuzeQ’s acts to maximize profit, how many boards will be produced? How many workers will be employed? What will the SuzeQ's profit be at this output level? Why? (State the key condition used in your analysis below). (f)

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Final Review - Handout 4 Production Cost Analysis 1 a b...

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