Again, consider the following table for a profit-max, perfectly competitive firm
ID: 1202344 • Letter: A
Question
Again, consider the following table for a profit-max, perfectly competitive firm that produces using only labor and capital. You can calculate the values for the table cells with letters in them (though you won't enter all these values on the exam).
Calculate the value for Cell D, marginal cost between 24 and 25 units of labor employed, carefully following all numeric instructions.
Explanation / Answer
Calculate Total Cost When 24 units of labor are used (Cell A) -
Total Cost = Labor cost when 24 units of labor are used + Capital cost when 24 units of labor are used
Total Cost = $2,400 + $3,000 = $5,400
Calculate Total Cost When 25 units of labor are used (Cell B) -
Total Cost = Labor cost when 25 units of labor are used + Capital cost when 25 units of labor are used
Total Cost = $2,500 + $3,300 = $5,800
Calculate Marginal Cost between 24 and 25 units of labor employed (Cell D) -
Marginal Cost = Total Cost when 25 units of labor are used - Total Cost when 24 units of labor are used
Marginal Cost = $5,800 - $5,400 = $400
Thus, the Marginal Cost between 24 and 25 units of labor employed (Cell D) is $400.