Homework document on Production and Cost. 4 questions, should take an hour or two of work.
Homework Assignment #5
Production and Cost Chapter 8
Complete Questions #2, #6, #9, and #15 from the review questions on chapter 6 posted in your chapter 8 Content Folder and reprinted below.
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#2: Why is it that many businesses that were experiencing positive accounting profits have shut down even though their books indicated that they were profitable organizations?
#6: Senator Bedfellow suggests that the government should pay for all medical school tuition, arguing that this will lower doctors’ fees “because then doctors would not have to charge so much to pay back their medical school loans.” Would you expect this policy to lower doctors’ fees over the next twenty years? Explain why or why not being sure to explain whether you agree with the Senator’s reasoning or not.
#9: What is the impact of a lump sum tax on marginal cost, average total cost, average variable cost and/or average fixed cost? What is the impact of a per unit tax on marginal cost, average total cost, average variable cost and/or average fixed cost? Briefly explain.
SCROLL DOWN FOR QUESTION #15
#15
Fill in the following table:
| Units of | QUANTITY | MPl | WAGE | TFC | TVC | TC | MC | AFC | AVC | ATC |
| Variable | Total | Marginal | RATE | total fixed | total variable | total | marginal | average fixed | average | average |
| Input | Product | Product | per day | cost | cost | cost | cost | cost | variable cost | total cost |
| (Labor) | Or Output | Of Labor ∆Q/∆L | per worker |
| Cost of labor W*L | (tfc+tvc) | ∆TC/∆q OR ∆TVC/∆q | tfc/q | tvc/q | tc/q |
| 0 | 0 | N/A | 100 |
|
| N/A | N/A | N/A | N/A | |
| 1 | 2 | 2 | 100 |
|
| 50 |
|
|
| |
| 2 | 5 | 100 | 300 |
|
|
| ||||
| 3 |
| 10 | 100 |
| 600 |
| 17.65 |
|
| |
| 4 | 23 | 6 | 100 |
|
| 30.43 | ||||
| 5 |
| 4 | 100 |
|
|
|
|
|
| |
| 6 | 28 | 1 | 100 | 300 |
|
|
| |||
| 7 | 28.1 | 0.1 | 100 | 300 |
|
|
|
| 24.91 |
|
What is the relationship between the Marginal Cost and the Marginal Product of Labor? In your answer be sure to account for the shape of the marginal product of labor and the marginal cost curves.
What phenomenon or tendency that explains the shape of the marginal product of labor curve and hence, the marginal cost curve? Define the ‘law’ and explain why it holds in the short run.
How many works should this firm hire? Is the third worker the firm’s best worker? Why or Why not?
Is this firm operating in the short run or in the long run? Explain the difference between the short run and the long run.
