Use the following information to work the following problems. Mike’s body board
ID: 1138584 • Letter: U
Question
Use the following information to work the following problems.
Mike’s body board factory pays $60 a day for equipment and $200 a day to each student it hires. The table sets out Mike’s total product schedule.
Mike’s body board factory rents equipment for shaping boards and hires students. It pays $60 a day for equipment and $200 a day to each student it hires. The table sets out Mike’s total product schedule.
Labor
(workers per day)
Total product
(body boards per day)
0
0
1
20
2
44
3
60
4
72
Construct Mike’s marginal product and average product schedules (2 points).
Over what range of workers do marginal returns increase (2 point)?
Construct Mike’s total variable cost and total cost schedules (2 points).
Construct the average fixed cost, average variable cost, and average total cost schedules and the marginal cost schedule (2 points).
At what output is Mike’s average total cost at a minimum? At what output is Mike’s average variable cost at a minimum (2 points)?
Labor
(workers per day)
Total product
(body boards per day)
0
0
1
20
2
44
3
60
4
72
Explanation / Answer
Marginal returns increase Over 1 to 2 range of workers.
At a output level of 44 Mike’s average total cost at a minimum.
At a output level of 44 Mike’s average variable cost at a minimum.
L TP MP = TP / L AP = TP / L TFC($) TVC($) TC($) = TFC+TVC MC = TC / TP AFC($) = TFC/TP AVC($) = TVC/TP ATC($) = TC/TP 0 0 60 60 1 20 20 20 60 200 260 10 3.00 10.00 13.00 2 44 24 22 60 400 460 50 1.36 9.09 10.45 3 60 16 20 60 600 660 -25 1.00 10.00 11.00 4 72 12 18 60 800 860 -50 0.83 11.11 11.94