1. Crunchy-Wunchy Flakes (\"Absolutely no food value, but we have great prizes!\

Question

1. Crunchy-Wunchy Flakes ("Absolutely no food value, but we have great prizes!") are produced using fixed inputs of 20 machine-days/period, with wage rate w at $20abour-day and rental rate r at $10/machine-day. Its short-run production function is given by the equatio Q-300.5L. where Q is in tonnes/period. Calculate its average product of labour and marginal product of labour functions, and then give its total cost, average fixed cost, average variable cost, and average total cost equations as functions of Q

Explanation / Answer

Q = 30L - 0.5L2

(a) Average product of labor (APL) = Q / L = 30 - 0.5L

(b) Marginal product of labor (MPL) = dQ / dL = 30 - L

(c) Total cost (C) ($) = Fixed cost (FC) + Total variable cost (TVC) = 20r + wL = (20 x 10) + 20L = 200 + 20L

(d) Average fixed cost = FC / Q = 200 / Q

(e) Average variable cost = TVC / Q = 20L / Q

(f) Average total cost = C / Q = (200 / Q) + (20L / Q)

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