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
|
|
|
|
|
|
|
|