Question: A firm's product sells for $2 per unit. The firm produces output using capital (which it rents for $75 per hour) and labor (which is paid a wage of $15 per hour under a contract for 20 hours or labor services). Complete the following table.
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P= 2 |
| K |
L |
Q |
MPk |
Apk |
Apl |
VMPk |
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| 0 |
20 |
0 |
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0 |
0 |
0 |
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| 1 |
20 |
50 |
50 |
50 |
2.5 |
100 |
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| 2 |
20 |
150 |
100 |
75 |
7.5 |
300 |
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| 3 |
20 |
300 |
150 |
100 |
15 |
600 |
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| 4 |
20 |
400 |
100 |
100 |
20 |
800 |
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| 5 |
20 |
450 |
50 |
90 |
22.5 |
900 |
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| 6 |
20 |
475 |
25 |
79.16 |
23.75 |
950 |
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| 7 |
20 |
475 |
0 |
67.85 |
23.75 |
950 |
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| 8 |
20 |
450 |
-25 |
56.25 |
22.5 |
900 |
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| 9 |
20 |
400 |
-50 |
44.44 |
20 |
800 |
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| 10 |
20 |
300 |
-100 |
30 |
15 |
600 |
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| 11 |
20 |
150 |
-150 |
13.36 |
7.5 |
300 |
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a) Identify the fixed and variable cost
b) What are the firm's fixed costs
c) What is the variable cost of producing 475 units of output
d) How many units of the variable input should be used to max profits
e) What are max profits firm can earn
f) Over what range of the variable input usage do increasing marginal returns exist
g) Over what range of input usage do decreasing marginal returns exist
h) Over what range of input usage do negative marginal returns exist