PART B

QUESTION 1

The table shows the production cost of the electric company in Nabawan.

TP (unit) AVC (RM) AC (RM) TC (RM) AFC (RM) MC (RM)

0 0 0 500 500/0 = 0 -
1 700-500 = 700/1 = 700 700 500/1 = 500 200
200
2 800-500 = 800/2 = 400 800 500/2 = 250 100
300
3 1050-500 = 1050/3 = 1050 500/3 = 250
550 350 166.7
4 1450-500 = 1450/4 = 1450 500/4 = 125 400
950 362.5
5 1960-500 = 1960/5 = 1960 500/5 = 100 510
1460 392

Based on the table above, answer the following questions.

a) Complete the table by using the information given.

b) Is the firm operating in the short run or long run? Why?

c) Give one (1) example of variable input that might be used by the above company.

QUESTION 2

The following table refers to short run production of a firm.

Labour Total Products Marginal Product Average Product

(Units) (Units) (Units)
0 0 - 0
1 5 5 5
2 13 8 6.5
3 26 13 8.67
4 35 9 8.75
5 39 4 7.8
6 39 0 6.5
7 36 -3 5.14

a) Complete the table above.

b) Which stage will a rational producer choose? Why?
Stage 2 is the most rational stage for producer to produce their product and they
are able to maximize the output.

c) At what number of labour does diminishing marginal returns set in?

Labour number 4, since MP start to decline when they able to maximize the
output.

QUESTION 3

a) The following table shows the production cost of a firm.

Quantity TC TVC AFC AC MC
0 50 0 - -
1 88 38 50 88
2 124 74 25 62
3 173.01 123.01 16.67 57.67
4 224 174 12.5 56
5 284 234 10 56.8
6 352.02 302.02 8.33 58.67
7 427 377 7.14 61
8 505.04 455.04 6.25 63.13

Given the Total Fixed Cost for this firm is RM50. Complete the table by computing the amount
of Total Cost (TC), Total Variable Cost (TVC), Average Fixed Cost (AFC) and Marginal Cost
(MC).

b) Is the firm operating in short run or long run? Why?

c) The table below refers to short run production of Kencana Book Store.

Land 1 1 1 1 1 1 1 1 1
Labour 1 2 3 4 5 6 7 8 9
TP 5 11 19 28 38 47 55 55 51
MP 5 6 8 9 10 9 8 0 -4
 AP 5 5.5 6.33 7 7.6 7.83 7.85 6.87 5.66

i) Complete the above table.

ii) At what number of labour does diminishing marginal returns set in? Why?
- Labour at 6, since MP start to decline when producer able to maximize the output.

iii) Based on above table, distinguish the beginning and the end of Stage I, Stage II and
Stage III.
- Stage I, Labour at 1-5
- Stage II, Labour at 6-8
- Stage III, Labour 9