1. JC\'s (for Josh and Charlie\'s) Dead by Dawn is an extreme fitness center. JC

Question

1. JC's (for Josh and Charlie's) Dead by Dawn is an extreme fitness center. JC's innovative training methods results in their clients either achieving the best physical condition of their lives or premature expiration - whichever comes first. The relationship between the number of trainers JC's employs and the number of people trained each day is listed in the table below. Number of Trainers Output Marginal (number trained)Product Total Cost Average Total Cost Marginal Cost 15 30 50 65 75 80 83 A) Complete the marginal product column. What pattern do you see? Explain what you see B) Each trainer is paid S400 a day. Also, JC's has fixed cost of $3,000 per day. Us this information to complete the column for total cost.

Explanation / Answer

Output

(number trained)

A) Marginal product is the change in output resulting from an increase of one more input.

Here in this case the marginal product is gradually increasing at first, reaching a maximum point and then decreasing. Here the marginal product is increasing till the number of trainers employed equals 3. It reaches to the maximum when the number of trainers employed is 3 and then decrease gradually when the number of trainers employed increases to 7.

           In this case as we explained in the previous paragraph, the marginal product increases at first, reaches to the maximum, then decreases. From this pattern we can say that the marginal product exhibits the law of diminishing returns. Diminishing return means decrease in the marginal output of production with the increase of a specific factor of production, all other factors remaining constant. From the observed pattern of change of the marginal product in the table we can say that the marginal product exihibits diminishing returns.

B) Total Cost of production is the total of fixed cost and variable cost. TC=FC+VC. In the given question the FC=$3000 per day and VC=$400 per day. Here in the given question, the number of trainers is the variable the cost for paying the trainers is the variable cost. We have multiplied the variable cost with the number of trainers and added the fixed cost in order to obtain the total cost.

For 0 trainer there is no variable cost involved but only the fixed cost as even if there is no trainers JC"s has to bear the fixed cost. So the total cost is 3000.

For 1 trainer the variable cost is (1*400) and fixed cost is 3000. So total cost is 3000+400=3400.

For 2 trainers the variable cost is (2*400)=800 and fixed cost is 3000. So total cost is 3000+800=3800.

In the same way, we have calculated the total costs for the different number of trainers.

Number Of Trainers

Output

(number trained)

Marginal Product Total Cost 0 0 - 3000 1 15 15 3400 2 30 15 3800 3 50 20 4200 4 65 15 4600 5 75 10 5000 6 80 5 5400 7 83 3 5800

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