Using the information in data set one, which I have included in the table below,
ID: 1222141 • Letter: U
Question
Using the information in data set one, which I have included in the table below, recalculate total cost, fixed cost, variable cost, marginal cost, average total cost, average variable cost and average fixed costs if the price of the fixed input (the small stores rent) is not $200 but $250. A new lease may have caused the rent to increase. I have created Table 1 for you to put your answers in. Assume the price of the variable input, labor, is still $50 per unit. When fixed costs change which other costs will increase? Compare the costs you calculate for table one to the costs calculated in the notes in chapter 7 to find the answer.
TABLE ONE FOR ANSWERS TO PROBLEM ONE
Units of Labor
Total
Product
(output)
FC
VC
TC
MC
ATC
AVC
AFC
0
0
1
3
2
7
3
12
4
16
5
19
6
21
Problem Two - Using the information in data set one, which I have included in the table below, recalculate total cost, fixed cost, variable cost, marginal cost, average total cost, average variable cost and average fixed costs if the price of the variable input (which is labor in this example) is not $50 but $60. I have created Table 2 for you to put your answers in. Assume that fixed costs remain at $250. When the price of a variable input changes which other costs will increase? Compare the costs you calculate for table two to the costs calculated in table one to find your answers.
TABLE TWO FOR ANSWERS TO PROBLEM TWO
Units of Labor
Total
Product
(output)
FC
VC
TC
MC
ATC
AVC
AFC
0
0
1
3
2
7
3
12
4
16
5
19
6
21
Units of Labor
Total
Product
(output)
FC
VC
TC
MC
ATC
AVC
AFC
0
0
1
3
2
7
3
12
4
16
5
19
6
21
Explanation / Answer
Units of Labor Total FC VC TC MC ATC AVC AFC Product (output) 0 0 $250 0 $250 _ _ 1 3 $250 50 $300 $50 $100 16.6666667 $83.33 2 7 $250 100 $350 $50 $50 14.2857143 $35.71 3 12 $250 150 $400 $50 $33 12.5 $20.83 4 16 $250 200 $450 $50 $28 12.5 $15.63 5 19 $250 250 $500 $50 $26 13.1578947 $13.16 6 21 $250 300 $550 $50 $26 14.2857143 $11.90 Units of Labor Total FC VC TC MC ATC AVC AFC Product (output) 0 0 $250 0 $250 _ _ 1 3 $250 60 $310 $60 $103 20 $83.33 2 7 $250 120 $370 $60 $53 17.1428571 $35.71 3 12 $250 180 $430 $60 $36 15 $20.83 4 16 $250 240 $490 $60 $31 15 $15.63 5 19 $250 300 $550 $60 $29 15.7894737 $13.16 6 21 $250 360 $610 $60 $29 17.1428571 $11.90
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