A firm's product sells for $4 per unit in a highly competitive market. The firm produces output using capital (which it rents at $25 per hour) and labor (which is paid a wage of $30 per hour under a contract for 20 hours of labor services). Complete the following table and use that information to answer these questions: a. Identify the fixed and variable inputs. b. What are the firm's fixed costs? c. What is the variable cost of producing 475 units of output? d. How many units of the variable input should be used to maximize profits?

ENGR.ECONOMIC ANALYSIS
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2. A firm's product sells for $4 per unit in a highly competitive market. The firm produces output using capital (which it rents at $25 per hour) and labor (which is paid a wage of $30 per hour under a contract for 20 hours of labor services).

Complete the following table and use that information to answer these questions:
a. Identify the fixed and variable inputs.
b. What are the firm's fixed costs?
c. What is the variable cost of producing 475 units of output?
d. How many units of the variable input should be used to maximize profits?
e. What are the maximum profits this firm can earn?
f. Over what range of the variable input usage do increase marginal returns exist?
8. Over what range of the variable input usage do decreasing marginal returns exist?
h. Over what range of input usage do negative marginal returns exist?

APK
APL
VMPK
MPK
K L
20
21200
20
50
1
2
20
150
20
300
4
20
400
hodel
to vil
20
450
20
475
20
475
8
20
450 ib lo whl
9
20 400
10 20
300
bog
11
20 150
Transcribed Image Text:APK APL VMPK MPK K L 20 21200 20 50 1 2 20 150 20 300 4 20 400 hodel to vil 20 450 20 475 20 475 8 20 450 ib lo whl 9 20 400 10 20 300 bog 11 20 150
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