Question

Assume that labor and capital are the only inputs used by a firm. Capital is fixed at 5 units, which cost $100 each per day. Each worker can be hired for $200 each per day. Complete the following table to show average variable cost (AVC), average total cost (ATC), and marginal cost (MC).

Answer 1

Based on the given cost of inputs such as capital and labor costs, the complete table would be:

Labor         Total Output per day         AVC              ATC                  MC

Quantity    

 0                           0                              0                   $500            

  1                        100                              $2                 $7                 $2.00

  2                        250                            $1.60            $3.60             $1.33

  3                        350                            $1.71                $3.14              $2.00

  4                        400                            $2                  $3.25             $4.00

  5                        425                            $2.35            $3.53              $8.00

How do you find the average variable cost, the average total cost and the marginal cost?

The average variable cost is the cost of labor divided by the quantity of output. For instance, the average variable cost for 3 units of labor is:

= (3 x 200 per worker) / 350

= 600 / 350

= $1.71

Average total cost is:

= (Variable cost + Fixed cost) / Output

For 3 units of labor, the average total cost is:

= (3 x 200 per worker + 500 fixed cost) / 350

= 1,100 / 350

= $3.14

Marginal cost can be found as:

= Change in Total cost / Change in output

For 3 units of labor, the average total cost is:

= ( 1,100 - (2 x 200 + 500) ) / (350 - 250)

= $2.00

Find out more on marginal cost at brainly.com/question/26257413.