a. What is the marginal product for each worker?
b. A worker costs $100 a day and fixed costs are $200. What is the firm’s total cost for the each level of output?
c. What is average total cost?
d. What is marginal cost?
e. Compare marginal product and marginal cost. Explain the relationship.
f. Compare average total cost and marginal cost. Explain the relationship.
(Taken from Principles of Microeconomics (Fourth Canadian Edition) by Mankiw, Kneebone, McKenzie, Rowe, p. 290, number 5)
1. Suppose two firms in a perfectly competitive industry have identical MC curves, but have different fixed costs. Do they have the same shut-down point? Do they have the same break-even point?
(Taken from Microeconomics (Canadian edition) by Curtis, Irvine, and Begg, p. 173, no. 1)
2. Winnie’s Window Cleaning is a small local operation. Winnie presently cleans the outside windows in her neighbours’ houses for $36 per house. She does ten houses a day. She is incurring total costs of $420 and of this amount $100 is fixed. The average variable cost per house is constant.
a. At a price of $36, what is her break-even level of output?
b. If she cannot increase her output in the short run, should she shut down?
(Taken from Microeconomics (Canadian edition) by Curtis, Irvine, and Begg, p. 173, no. 2)
3. A manufacturer of vacuum cleaners incurs a constant average variable cost equal to $80. She can sell the appliances to a wholesaler for $130. Her annual fixed costs are $200,000. How many vacuums must she sell in order to cover her total costs?
(Taken from Microeconomics (Canadian edition) by Curtis, Irvine, and Begg, p. 173, no. 3)
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