Reference no: EM13868733

1. Joe runs a farm. He rents the land for $100 a day, and he can hire workers for $20 per day for each worker. His short run production function is given in the first two columns of the following table. Workers Output MP VC FC TC AFC AVC ATC MC 0 0 ------- 0 ------- -------- ------- ----- 1 10 10 20 20 2 25 15 40 20 3 45 20 60 20 4 60 15 80 20 5 70 10 100 20 6 74 4 120 20 a) Complete the table above. b) Carefully graph AVC, ATC, and MC. Your graph should have cost (measured in dollars) on the vertical axis, and output on the horizontal axis. c) With which worker does diminishing marginal returns set in? 2. Carefully explain the difference between diminishing marginal returns and decreasing returns to scale. 3. Suppose a competitive firm can sell its output for $5 per unit. The following table gives the firm's short run production function. Labor Output 0 0 1 60 2 130 3 180 4 220 5 250 6 260 In the table below, you will determine several points on the firm's demand curve for labor. To do this, you must determine how many workers the firm should hire for different values of the wage rate in order to maximize profit. Complete the table below: Wage Rate Per Worker Quantity Demanded of Workers $45 $75 $225 $270 $320 $340 4. What are the factors that can lead to a change in demand for labor (shifting of the labor demand curve?) Describe how labor demand would change in response to a change in each factor separately.