You are assigned the task of computing the variable capital and
labor costs for Cost Cutters production level. Below is a table with
the capital and labor requirements for ten different levels of
production.
|
Production Level |
Capital |
VC$12 |
Labor |
VC$6 |
TVC |
MC |
AVC |
|
0 |
0 |
0 |
|||||
|
1 |
3 |
6 |
|||||
|
2 |
6 |
10 |
|||||
|
3 |
9 |
13 |
|||||
|
4 |
12 |
16 |
|||||
|
5 |
15 |
20 |
|||||
|
6 |
18 |
25 |
|||||
|
7 |
21 |
31 |
|||||
|
8 |
24 |
38 |
|||||
|
9 |
27 |
46 |
|||||
|
10 |
30 |
55 |
Complete the table and answer the following:
- Assuming the price of labor is $6 per unit and the price of
capital is $12 per unit; compute the total variable costs, the marginal
costs, and the average variable costs for the firm. - Using the numbers that you calculated above, explain the
relationship between the marginal cost and average variable cost. Using
the same numbers, explain the “marginal cost” in terms of additional
inputs needed to produce a marginal unit of output. - If the output price was $62, how many units of output would the firm produce? Explain.
Please show work.


0 comments