Table: Marie\'s Textbook Company Quantity of Labor (workers) of Textbooks 0 Quan

Question

Table: Marie's Textbook Company Quantity of Labor (workers) of Textbooks 0 Quantity 0 20 80 130 170 200 220 3 4 6 (Table: Marie's Textbook Company) Marie has a small publishing company that produces textbooks. She has fixed costs of $1800 per month and hires workers (assume the only thing necessary to produce more books is to hire more labor) for $2,000 per month. The table shows Marie's monthly production function. With as much precision as possible, calculate the following: a) total cost of production when four workers are employed b) the output level that produces the lowest average total cost c) the price that Marie must charge in order to break even on the production of 130 textbook:s

Explanation / Answer

a) When 4 workers are employed,

Employee cost = $2000*4 = $8000

Fixed Cost = $1800

Total Cost = 8000+1800 = $9800

b)

For 1 labour, Total Cost = 1800+2000 = $3800

Average total cost = 3800/20 = $190

For 2 labour, Total cost = 1800+(2*2000) = $5800

Avg total cost = 5800/80 = $72.5

For 3 labour, Total cost = 1800+(3*2000) = $7800

Avg total cost = 7800/130 = $60

For 4 labour, Avg total cost = 9800/170 = $57.64

For 5 labour, Total cost = 1800+(5*2000) = $11800

Avg total cost = 11800/200 = $59

For 6 labour, Total cost = 1800+(6*2000) = $13800

Avg total cost = 13800/220 = $62.72

Output level for which min avg total cost is 4

c)

Cost for 130 books = $7800

Avg total cost = $60

So price should be $60 to break even

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.