Explore BrainMass

Explore BrainMass

    Al’s Bicycle Town: Production and Costs

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    The following table gives the total weekly output of bicycles at Al's Bicycle Town.

    Table 1

    Labor Total Product (TP) Average Product of labor (AP) Marginal Product of labor (MP)

    0 0 na na

    1 100 100 100

    2 300 ----- ___

    3 450 ___ ___

    4 ___ ___ 110

    5 630 ___ ___

    6 ___ 110 ___

    Complete this table.
    Draw the graphs of the marginal product (MP) and the average product (AP).
    To learn how to plot the data in Excel, see https://www.youtube.com/watch?v=B3U9tDcoNeI
    Where do the AP and MP curve cross?
    The cost of 1 worker is $2000 per month. Total fixed cost is $4000 per month.

    Complete Table 2 using your answers from Table 1 and by computing total variable cost (TVC) and total cost(TC).
    Table 2

    Labor Total Product (TP) Total variable cost (TVC) Total cost (TC)

    0 0 na 4000

    1 100 2000 ___

    2 300 ----- ___

    3 450 ___ ___

    4 ___ ___ 12000

    5 630 ___ ___

    6 ___ 12000 ___

    Draw the graphs of the TC and TVC curves. What is the relationship between these two curves?
    Complete Table 3 by using your answers from the previous Tables and calculating the AVC, ATC, and MC.
    Table 3

    Total Product (TP) Average variable cost (AVC) Average total cost (ATC) Marginal cost (MC)

    0 na na na

    100 20 ___ 20

    300 ----- ___ ___

    450 ___ ___ ___

    ___ ___ 21.43 ___

    630 ___ ___ ___

    ___ ___ ___ 66.67

    Draw the graphs of the ATC, AVC, and MC curves. What is the relationship between the ATC and AVC curves? Between the MC and AVC curves?

    © BrainMass Inc. brainmass.com March 5, 2021, 1:52 am ad1c9bdddf
    https://brainmass.com/economics/production-function/al-s-bicycle-town-production-and-costs-633438

    Attachments

    Solution Preview

    Hi, refer to the attached file please. I put the answers in red, and you find the explanation of the answers below. I used the 2nd sheet in the Excel file to draw the graphs.

    TABLE 1:
    AP = TP / labor, that's how the values of AP were solved at Labor = 2, 3, 5
    At labor = 6, use TP = AP x Labor = 110 x 6 = 660
    At Labor = 4, you notice that MP is given. MP = change in TP / change in labor, so 110 = TP(4) - TP(3) / 4 - 3 ==> 110 = TP(4) - 450 / 1 ==> TP(4) = 110 + 450 = 560 bicycles
    To solve the blanks in MP column, ...

    Solution Summary

    Application of formulas, graphing, and explaining the relationships between the resulting production curves and between the cost curves.

    $2.49

    ADVERTISEMENT