Yardstick International College

Microeconomics aggregate mark = 20%

WORKSHEET ON UNIT FOUR
Part One: - Workout
1. Suppose the AP of 6 workers is 100 units of a good x and that of 7 workers is 110 units.
Find the MP of the 7 th unit of workers.
2. Suppose the TP of 3 workers is 210 Kg. of good x, and that of 4 workers is 280 Kg. Find the MP of the 4 th
unit of worker.
3. On the basis of information given in the following table answer questions.
Labour 0 1 2 3 4 5 6
Total Product 0 3 8 12 14 14 12

A. The law of diminishing marginal returns starts to operate _____units of labor.

B. the MP L is negative how much units of labor are employed?
C. the MP L = AP L at _____units of output (TP).
D. the MP L is the maximum how much units of labor are employed?
E. If the labor variable factor is 3 units, what is the AP L?
F. Find the MP L of the 5 th unit of labor.
4. If the price of labor (P L ) is Birr 4 and the price of capital (P K ) is Birr 6 , what is the marginal rate of
technical substitution at the optimal input choice?
5. A firm reports that MP K is 6 and MRTS KL is 3. What is the MP L?
6. The following data refer to the production department of the firm.
a. Number of units produced; 500
b. Expense for electricity; 2000 Birr
c. Cost of interest on borrowed capital; 3000 Birr
d. Expense for insurance; 500 Birr
e. Number of workers; 300
f. Wage rate per worker; 50 Birr
g. Cost of raw materials; 10, 000 Birr;
then, Compute AVC and AC for the firm.
7.
Output 0 1 2 3 4 5 6
TC 24 33 41 48 54 61 96

Refer to the above data, Find;

a. TVC of producing 5 units of output.

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 b. ATC of producing 4 units of output.
c. The MC of producing the sixth unit of output.
d. AVC of producing 6 units of output.
e. AFC and AVC producing of the third unit of output.
8. If the firm has a fixed production cost of Birr 100 and AVC at quantity of 10 is Birr25, what is the value of
TC ?
9. Aster owns a coffee shop that has monthly variable costs equal to Birr 6000 if Aster sells 1200 cups of
coffee each month. What is the average variable cost per-cup ?
10. A firm has a fixed production cost of Birr 10, 000 and a constant marginal cost of production of Birr 200
per- unit produced. What is the firm's total cost function and average cost?
11. Suppose a firm faces a cost function; TC = 50 + 4Q + Q 2 Find out TFC, TVC, AC, AVC, and MC.
12. Refer to the above equation (11) , when the firm produces 5 units of output what is the TC , TVC , AC ,
AVC , AFC , and MC of a firm ?
13. Suppose a cost of function is gives as; C = 1/2Q 2 + Q +15 determine,
A) TFC B) TVC of producing 5 units of output
C) AVC of 5 units of output D) AC of 5 units of output. E) MC of the 5 th unit
F) Whether AC is falling or rising when 5 units are produced.
14. Short run total cost function of a firm is given by; C = 100 - 50Q + 12Q 2 Calculate the following when the
firm produces 10 units of output. Find out TFC, TVC, AVC, AC, and MC.
15. Assume that the MP L is 2, the MP K is 4, and the wage rate is Birr 3, the rental price of capital is Birr 6,
and the price of output is Birr 1.50. What conditions the firm operates now?
16. Suppose that the price of labor (P L) is Birr 60 and the price of capital (P K ) is Birr 90, what is the equation
of the iso-cost line corresponding to a TC of Birr 840 ? And if the amount of labor is 2, what is the amount of
capital?
17. A firm employs labor as the only variable factor along with a fixed quantity of capital, wage rate of labor
is 80 per day and its marginal cost is 40 units of output. What is MP L ?
18. If the P L =50 Birr and P K =100 Birr for a cost of minimizing firm, calculate its MP K given that MP L =10.
19. The data from production function and the price of inputs determines all the cost function from the
information given below complete the table. In the following table the plant size is determined by capital (K)
that is 5 in the example. Since the P K = 33 Birr the fixed cost (TFC) is Birr 15 at all level of output. The price
of the variable inputs (L) is Birr 22. The variable costs can be calculated for each level of input use and
associated with a level of output (Q or TP).

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 K L TP MP A TF TV TC MC AF AV AT
P C C C C C
5 0 0
5 1 5
5 2 12
5 3 21
5 4 31
5 5 40
5 6 48
5 7 55
5 8 61
5 9 66
5 10 70
5 11 73
5 12 75
5 13 76
5 14 76
5 15 75

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