Calculate fixed, variable cost and profits, find increasing, decreasing returns to exist.
The following table summarizes the short-run production function for your firm. Your product sells for $5 per unit, labor costs $5 per unit, and the rental price of capital is $20 per unit. Complete the following table, and then answer the accompanying questions.
(1)
|
(2)
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(3)
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(4)
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(5)
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(6)
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(7)
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K
|
L
|
Q
|
MPK
|
APK
|
APL
|
VMPK
|
0
|
5
|
0
|
|
|
|
|
1
|
5
|
10
|
|
|
|
|
2
|
5
|
30
|
|
|
|
|
3
|
5
|
60
|
|
|
|
|
4
|
5
|
80
|
|
|
|
|
5
|
5
|
90
|
|
|
|
|
6
|
5
|
95
|
|
|
|
|
7
|
5
|
95
|
|
|
|
|
8
|
5
|
90
|
|
|
|
|
9
|
5
|
80
|
|
|
|
|
10
|
5
|
60
|
|
|
|
|
11
|
5
|
30
|
|
|
|
|
- Which inputs are fixed inputs? Which are the variable inputs?
- Explain how much are your fixed costs?
- Illustrate what is the variable cost of producing 20 units of output?
- How many units of the variable input should be used to maximize profits?
- What are your maximum profits?
- Over what range of variable input usage do increasing marginal returns exist?
- Over what range of variable input usage do decreasing marginal returns exist?
- Over what range of variable input usage do negative marginal returns exist?