Reference no: EM1316561
1. Suppose that a chair manufacturer is producing in the short run (with its existing plant and equipment). The manufacturer has observed the following levels of production corresponding to different numbers of workers:
|
Number of Workers
|
Number of chairs
|
|
1
|
10
|
|
2
|
18
|
|
3
|
24
|
|
4
|
28
|
|
5
|
30
|
|
6
|
28
|
|
7
|
25
|
a) Calculate the marginal and average product of labour for this production function.
b) Does this production functions exhibits diminishing returns to labour? Explain.
c) Explain intuitively what might cause the marginal product of labour to become negative?
2. A firm has the following cost data:
|
Output
|
Total Cost
|
Variable cost
|
|
100
|
$7,000
|
$3,000
|
|
101
|
$7,400
|
$3,400
|
|
102
|
$7,900
|
$3,900
|
What are the FC, ATC, AFC, AVC and MC at these output levels?
3. Suppose UM sells student tickets to football games for $6 each, but you must wait in line for a half-hour to obtain a ticket. Further suppose that scalping is made legal in Florida. Non-student fans are willing to pay you $20 for your ticket. Attending the game will take approximately four hours. Suppose you have a part-time job where you can choose your own hours, which pays $8/hour.
a) What is your economic cost of buying a ticket?
b) What is your economic cost of attending the game (once you already bought the ticket)?
c) If you know you will have to work the day of the game, should you buy a ticket in order to resell it?