# Labor and output table and optimal choice of production

The table below shows a competitive firm's short run production function. labor is the firms only variable input, and market price for the firms product is $2 per unit

units of labor units of output

3 370

4 490

5 570

6 600

7 620

1. how much does the 5th unit of labor add to the firms total revenue?

2. if the wage rate is $200, how many units of labor will the firm employ?

3. if the wage rate is $200,the firm should..........?

4. if market price for the firms product increases to $5 how many units of labor will the firm employ at the wage rate of $200?

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#### Solution Preview

1. the 5th unit of labour adds a quantity of 570-490 = 80 unit at $2 = $160 increase in Total Revenue

2. An extra unit of labor ...

#### Solution Summary

A labor and output table are provided (ie. the amount of output at different labor amounts) by the question. The answer discusses optimal solutions given this information for this competitive firm.

Managerial Economics

Fill in the blanks in the following spreadsheet showing the short-run costs for a firm. Use the completed spreadsheet to answer multiple choice questions 1 through 5.

Fill in the blanks

Average Average Average

Q Total Total Fixed Total Fixed Variable Total Marginal

Cost Cost Variable Cost Cost Cost Cost

Cost

0 20 ____ _____ xx xx xx XX

1 ___ ____ _____ ____ ____ ____ 20

2 ___ ____ _____ ____ 15 ____ ____

3 ___ ____ _____ ____ ____ 12 1/3 ____

4 ___ ____ 76 ____ ____ ____ ____

1. What is total fixed cost?

A. 10

B. 15

C. 20

D. Cannot be determined

E. None of the above

2. What is total cost when Q = 1?

A. 30

B. 35

C. 40

D. 20

E. None of the above

3. What is average total cost when Q = 2?

A. 10

B. 20

C. 30

D. 40

E. None of the above

4. What is marginal cost when Q = 3?

A. 5

B. 10

C. 15

D. 20

5. What is marginal cost when Q = 4?

A. 5

B. 10

C. 11

D. 15

E. 26

The production engineers at Impact Industries have derived the optimal combinations of labor and capital (the only two inputs used by Impact) for three levels of output: 120, 180, and 240 units of output:

Q L* K*

120 4 20

180 6 30

240 8 50

Q is the output level, L* is the optimal amount of labor to use, and K* is the optimal amount of capital to use. The price of labor is $100 per unit and the price of capital is $20 per unit.

6. If the manager of Impact Industries decides to produce 120 units, what will the long-run total cost and long-run average cost of producing 120 units?

7. If the manager of Impact Industries decides to produce 180 units, what will the long-run total cost and long-run average cost of producing 180 units?

8. If the manager of Impact Industries decides to produce 240 units, what will the long-run total cost and long-run average cost of producing 240 units?

9. Are there economies of scale over the output range 120 to 180? Explain briefly.

10. Are there dis economies of scale over the output range 180 to 240? Explain briefly.

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