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Decreasing marginal returns

A firms product sells for $2.00 per unit in a highly competitive market. The firm produces out put using capital (which rents at $75.00 per hour) and labor (which is paid as a wage at $15.00 per hour under contract for 20 hours of labor services) After completing the following table answer the following:

K L Q MP(k) AP(k) AP(L) VMP(k)
0 20 0
1 20 50
2 20 150
3 20 300
4 20 400
5 20 450
6 20 475
7 20 475
8 20 450
9 20 400
10 20 300
11 20 150

a. Identify the fixed and variable inputs?
b. What are the firms fixed costs?
c. What is the variable cost of producing 475 units of outputs?
d. How many units of the variable innpout should be used to maximize profits?
e. What are the maximum profits this firm can earn?
f. Over what range of the variable inputs usage do decreasing marginal returns exist?
g. Over what range of input usage do negative marginal returns exist?

If you can help me with this problem that would be great! Thanks so much.

Solution Preview

A firms product sells for $2.00 per unit in a highly competitive market. The firm produces out put using capital (which rents at $75.00 per hour) and labor (which is paid as a wage at $15.00 per hour under contract for 20 hours of labor services) After completing the following table answer the following:

K L Q ...

Solution Summary

This explains the concept of decreasing marginal returns

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