Question

Please classify and explain what each stage of production you are in for each of the given scenarios: (5 points) 2. a. Average physical product is 45 and the marginal physical product is -60, b. Average physical product is 27 and the marginal physical product is 47, c. Average physical product is 46 and the marginal physical product is 26. Please explain the relationship between average physical product (APP) and marginal physical product (MPP) (5 points) 3. 4. If your average physical product (APP) is equal to 3 using 5 inputs, what do you expect to happen to your current APP when your marginal physical product (MPP) is 9 when you move to 6 inputs? What is your new APP given this new MPP? Please show how you found your answer. (5 points) Given that your total cost is $1,000,000, your total fixed cost is $200,000, and your output is 50,000, what are your a) total variable cost, b) average variable cost, c) average fixed cost, and d) average total cost? Please show how you found your answer. (5 points) 5. 6. Suppose you have the following cost function cly) 16y2+200,000, please sketch the Average Fixed Cost, the Average Variable Cost, and the Average Total Cost curves where y represents the output and c(y) represents the total cost at output y. You may want to focus sketching these curves for outputs of 10, 20, 40, 50, 80, 100, 160, 200, 250, and 320. It is acceptable to sketch these curves using excel, but you should be able to sketch the curves by hand. (5 points) Please explain the argument why marginal cost can equal both the change in total cost divided by the change in output and the change in total variable cost divided by the change in output when total cost and variable cost are not equal? (5 points) 7. Please derive AVC apply the definition of AVC.) (5 points) 8. w/ APP, using the production and cost relationships. (Hint: define and Page 1 of 3 Last revised: 3/27/18

Answer 1

(2)

In Stage I of production, total product is increasing, AP > 0, MP > 0 and MP > AP until MP intersects AP at the end of Stage I.

In Stage II of production, total product is increasing but at decreasing rate throughout, so AP > 0, MP > 0 and AP > MP until MP equals 0 at the end of Stage II.

In Stage III of production, total product is decreasing, AP > 0, MP < 0 and AP > MP, where

AP: Average physical product and MP: Marginal physical product.

Therefore,

(a) When AP = 45 and MP = -60 < 0, this is Stage III.

(b) When AP = 27 > 0 and MP = 47 > 0 and MP > AP, this is Stage I.

(c) When AP = 46 > 0 and MP = 26 > 0 and AP > MP, this is Stage II.

NOTE: As per Answering Policy, 1st question is answered.