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Short-run cost formulas/ marginal product and marginal cost
2. Short-run cost formulasDouglas Fur is a small manufacturer of fake-fur boots in Houston. The following table shows the company's total cost of production at variousproduction quantities.Fill in the remaining cells of the table.TotalTotalProductMarginalCostCostTotal Fixed Total VariableCostCostAverageVariable CostAverage TotalCost(Pairs)(Dollars) (Dollars)(Dollars)(Dollars)(Dollars perpairDollars perpair0601552220w255430053506450On the following graph, plot Douglas Fost curve (ATC ATC) using the green points (triangle symbol). Next, plot its average variablecost curve (AVCAVC) using thest curve (MCMC) using the orange points (squaresymbol). (Hint: For ATC ATC and AVCAVC,e total cost of producing one pair of boots is $155,so you should start your average total cost1, 155). For matween the integers: Forexample, the marginal cost of increasingyour marginal cost curve by placing anorange square at (0.5, 95).)Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.200175COST PER UNIT (Dollars per pair)QUANTITY OF OUTPUT (Pairs of boots)3. The relationship between marginal product and marginal costFrances's Big Burger is a small restaurantlis hamburgers. For Frances, grills are a fixed input and workers are variable inputs. Assume thatlabor is Frances's only variable cost. Frances has a fixed cost of $80 per day and pays each of her workers $120 per day.Frances's total output schedule and total cost at each level of labor are presented in the following table.Fill in the blanks to complete the Marginal Product column for each worker and the Marginal Cost column at each level of labor. (Hint: Marginal cost isthe change in total cost divided by the change in the quantity of output. You can calculate it here by dividing the increase in total cost from hiring onemore worker by the marginal product from hiring one more worker.)Labor InputTotal OutputMarginal Product Total CostMarginal Cost( Number ofBurgers per( Burgers per(Dollars per(Dollars perWorkers)day)day)day)burger)$8040$2002100$320140$440160$560175$680When hiring the first and second workers, Frances's Big Burger facesmarginal returns to labor.Over the range of workers for which the marginal product is increasing, Frances's Big Burger faces- marginal cost.
