Assignment No. 5.1
Assignment No. 5.1
The following production grid shows the relationship between capital and labor inputs and the output that can be produced by a firm.
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Capital |
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Labor |
0 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
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|
0 |
0 |
1 |
3 |
6 |
8 |
10 |
12 |
13 |
13 |
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|
1 |
1 |
10 |
30 |
60 |
85 |
105 |
120 |
130 |
135 |
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2 |
3 |
30 |
85 |
105 |
120 |
150 |
180 |
210 |
230 |
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3 |
6 |
60 |
105 |
130 |
210 |
280 |
340 |
380 |
410 |
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4 |
8 |
85 |
120 |
210 |
410 |
500 |
570 |
620 |
660 |
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5 |
10 |
105 |
150 |
280 |
500 |
700 |
850 |
950 |
1000 |
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6 |
12 |
120 |
180 |
340 |
570 |
850 |
1100 |
1300 |
1400 |
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7 |
13 |
130 |
210 |
380 |
620 |
950 |
1300 |
1500 |
1600 |
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8 |
13 |
135 |
230 |
410 |
660 |
1000 |
1400 |
1600 |
1700 |
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Based on this information use Excel Charts to do the following:
(a) Set up an isoquant map with isoquants representing output levels of 10, 105, and 410 units of output.
(b) Set up a diagram showing the firm's short run production function assuming that the firm has only one unit of capital.
(c) Set up a diagram showing the firm's marginal product schedule assuming that the firm has only one unit of capital.
(d) Assume that capital is fixed at one unit in the short run and that the costs associated with the use of fixed inputs are $30 per period, while the wage rate is $10 per unit of labor per period. Use this information to perform the calculations necessary to set up a diagram showing total cost (TC) and total variable cost (TVC) of the firm per period in the short run.
(e) Also, use the information in part c to then set up a another diagram showing the firm's short run marginal cost (MC), average total cost (ATC), and average variable cost (AVC) in the range from 10 to 135 units of output.
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Solution: Assignment No. 5.1