The relation between marginal cost and marginal product of labor.

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Chapter 11, Problem 11.4.2RQ

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The relation between marginal cost and marginal product of labor.

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5.3 A column on barrons.com discussing General Motors (GM) made the following observation: "Even the seemingly variable' costs of hourly workers were made burdensome by union agreements whereby 95% of hourly workers' salaries were paid when they were laid off, turning variable labor compensation into a fixed cost." a. Aren't workers' salaries always a variable cost and not a fixed cost? Briefly explain the author's reasoning. b. Suppose that GM reduces its production of cars. Compare what happens to GM's average total cost production in a situation where (i) the company doesn't have this union agreement, and (ii) the company does have this agreement. Use a graph to illustrate your answer.

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Use the following information: TFC = $300, and Plabor = $20/hour. Fill in the blanks in the following table. Using the data graph the total cost, total variable cost, and the total fixed cost below. Labor (hours) MP TP = Q TFC TVC TC ATC AVC AFC MC 0 0 1 50 2 110 3 150 4 185 5 215 6 235 300 7 240 Using the data from the table on the first page, graph the average total cost, average variable cost, average fixed cost, and marginal cost below.