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Solutions to end of chapter 13 problems: 4, 5, 6 Marginal product concepts can also apply to other scarce resources and not

just labor. Here the scarce resource is time. Hours Quantity MP FC VC TC 0 0 10 0 10 1 10 10 10 5 15 2 18 8 10 10 20 3 24 6 10 15 25 4 28 4 10 20 30 5 30 2 10 25 35 a. Given in the table. MP = change in TP/ change in hours. b. The law of diminishing product explains the shape. Each hour is not as productive as the one before. MP 4.

MP

Hours c. As each hour yields fewer fish, the cost of fishing is increasing. Looks like a standard total cost curve except that there TC

TC

Q of Fish

e. MC falls and vice versa. Output MP FC VC TC ATC MC 0 0 200 0 200 1 20 20 200 100 300 15 5 2 50 30 200 200 400 8 3.5 4 120 30 200 400 600 5 3. This is equivalent to: change in VC/change in Q because TC only changes if VC changes. Marginal cost = change in TC/change in Q. At first there is specialization of labor (MP rises) but then the law of diminishing marginal productivity kicks in (MP falling). 6. 300 must be the fixed costs. f. MC and ATC intersect at the minimum of ATC (like we said in class)! MC falls and then rises. Q a. Since TC is 300 when no pizzas are produced (no workers are hired).333333 3 90 40 200 300 500 5. b.555556 2.333333 10 7 155 5 200 700 900 5.333333 5 140 20 200 500 700 5 5 6 150 10 200 600 800 5. If MP rises. Anytime MC is below ATC. Intersect at the min of ATC. see above ATC falls and then rises. ATC is falling. Workers a. . Interestingly.5.806452 20 Marginal product rises and then falls (unlike in number 4 where you only have diminishing marginal productivity. c. d. TC 0 1 2 3 4 5 6 300 350 390 420 450 490 540 VC 0 50 90 120 150 190 240 FC 300 300 300 300 300 300 300 MC 50 40 30 30 40 50 b.