Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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8) Use the following information on a hypothetical short-run production function to answer
questions a-c.
Units of Labor/Day
Units of Output/Day
5 6 7
120 140 155
8
165
9
168
The price of labor is $20 per day. Ten units of capital are used each day, regardless of output
level. The price of capital is $50 per unit.
a. Calculate the marginal and average variable product of each unit of labor input.
b. Calculate total, average total, average variable, and marginal costs.
c. Can
you
tell where diminishing marginal returns sets in?
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Transcribed Image Text:8) Use the following information on a hypothetical short-run production function to answer questions a-c. Units of Labor/Day Units of Output/Day 5 6 7 120 140 155 8 165 9 168 The price of labor is $20 per day. Ten units of capital are used each day, regardless of output level. The price of capital is $50 per unit. a. Calculate the marginal and average variable product of each unit of labor input. b. Calculate total, average total, average variable, and marginal costs. c. Can you tell where diminishing marginal returns sets in?
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