Marty\'s frozen yogurt shop sells cups of frozen yogurt in a local university to
ID: 1191860 • Letter: M
Question
Marty's frozen yogurt shop sells cups of frozen yogurt in a local university town. He owns 3 frozen yogurt machines. His other inputs are refrigerators, frozen yogurt mix, cups, sprinkles, and workers. He estimates that his production function when he increases the number of workers (and materials like yoghurt mix and cups) is: What are the fixed inputs and what are the variables inputs in this production process? What is Marty's VC and TC when he produces 110 cups? Assume he plays each worker $80 a day. His fixed costs are $100 a day. Other VC come to $.05 per cup of yogurt produced. Calculate the VC, FC and TC for all levels of output. Calculate MC for all levels of output.Explanation / Answer
Marginal cost is the increment in cost due to one unit increase in inputs.
Therefore, Marginal cost of the first worker is $135, as the cost rose by $135 (=$135 - 0) by the employment of the first worker.
Marginal cost of the second worker is $125, as the cost rose by $125 (=$260 - 135) by the employment of the second worker.
Marginal cost of the third worker is $115, as the cost rose by $115 (=$375 - 260) by the employment of the third worker.
Marginal cost of the fourth worker is $95, as the cost rose by $95 (=$470 - 375) by the employment of the fourth worker.
Marginal cost of the fifth worker is $90, as the cost rose by $90 (=$560 - 470) by the employment of the fifth worker.
Marginal cost of the sixth worker is $85, as the cost rose by $85 (=$645 - 560) by the employment of the sixth worker.
The above calculation is done using the variable cost values. But the marginal cost calculation can also be done using the total cost values, the resulting values of the marginal cost will be the same both ways.
In the marginal cost cell corresponding to the cell in which the quantity of labor is 0, just place a dash.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.