K L Q MPK APK APL VMPK

0 20 0 0 0 0 0
1 20 50 50 50 2.5 200
2 20 150 100 75 7.5 400
3 20 300 150 100 15 600
4 20 400 100 100 20 400
5 20 450 50 90 22.5 200
6 20 475 25 79.17 23.75 100
7 20 475 0 67.86 23.75 0
8 20 450 -25 56.25 22.5 -100
9 20 400 -50 44.44 20 -200
10 20 300 -100 30 15 -400
11 20 150 -150 13.63 7.5 -600

a. Fixed inputs = Labor

Variable inputs = Capital
b. FC = 30 x 20 = 600
c. To produce 475 unit we need to rent 6 capital = 6 x 25 = 150
d. To maximize profit VMPK = r
K = 6 -> VMPK = 100 and r = 150
e. Increasing marginal returns happen when K between 0 and 3
f. Decreasing marginal returns happen when K between 3 and 7
g. Negative marginal returns happen when K greater than 7
a. The fixed cost of producing 10 units is $100

b. Variable cost of producing 10 units

V(Q) = 20Q + 15Q2 + 10Q3
V(10) = 20(10) + 15(10)2 + 10(10)3
V(10) = 200 + 1500 + 10,000
V(10) = $11,700

c. Total cost of producing 10 units = Fixed cost + variable cost

= $100 + $11,700
= $11,800
100
d. The average fixed cost of producing 10 units = =$ 10
10
11,700
e. The average variable cost of producing 10 units = =$ 1,170
10
11,800
f. The average total cost of producing 10 units = =$ 1,180
10

g. MC(Q) = 20 + 30Q + 30Q2

MC(10) = 20 + 30(10) + 30(10)2
MC(10) = 20 + 300 + 3,000
MC(10) = $3,320
a. Contract ; because it based on legal agreement
b. Vertical integration ; because the firm using the input from the firm to produce another product
c. Spot exchange ; because it’s not based on legal agreement
d. Spot exchange ; because it’s not based on legal agreement

a. Human capital ; because the employee must learn specific skill and it can’t be transferred
b. Physical asset specificity ; because it can only be used for a particular product
c. Site specificity ; because the firm located the factory near to its primary buyer to engage in
exchange