Economics

Production and Cost Help.

(See attached file for full problem description)
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Page 331 problem 2

From your knowledge of the relationships among the various production functions, complete the following table:

Variable Input Total Product Average Product Marginal Product
         L   TP L* (=Q)          AP L*         MP L*
0 0 - -
1 _____ _____ 8
2 28 _____ _____
3 _____ 18 _____
4 _____ _____ 26
5 _____ 20 _____
6 108 _____ _____
7 _____ _____ -10


L* means that the "L" should be a very small capital L… but I don't know how to show that with the keyboard.



Page 332 problem 4

The amount of fish caught per week on a trawler is a function of the crew size assigned to operate the boat. Basted on past data, the following production schedule was developed:

     Crew Size       Amount of fish caught
(Number of men) per week (hundreds of pounds)

2 3
3 6
4 11
5 19
6 24
7 28
8 31
9 33
10 34
11 34
12 33


a. Over what ranges of workers are there (I) increasing, (ii) constant, (iii) decreasing, and (iv) negative returns?
b. How large a crew should be used if the trawler owner is interested in maximizing the total amount o f fish caught?
c. How large a crew should be used if the trawler owner is interested in maximizing the average amount of fish caught per person?


Page 370 problem 3

Howard Bowen is a large cotton farmer. The land and machinery he owns has a current market value of $4,000,000. Bowen owes his local bank $3,000,000. Last year Bowen sold $5,000,000 worth of cotton. His variable operating costs were $4,500,000; accounting depreciation was $40,000 although the actual decline in value of Bowen's machinery was $69,999 last year. Bowen paid himself a salary of $50,000 which is not considered part of his variable operating costs. Interest on his bank loan was $400,000. If Bowen worked for another farmer or a local manufacturer, his annual income would be about $30,000. Bowen can invest any funds that would be derived, if the farm were sold, ot earn 10 percent annually (Ignore taxes)

a. Compute Bowen's accounting profits
b. Compute Bowen's economic profits.  



Page 372 problem 6

From your knowledge of the relationships among  the various cost functions, complete the following table:

Q TC FC VC ATC AFC AVC MC
0 125 ___ ___ ___ ___ ___ ___
10 ___ ___ ___ ___ ___ ___ 5
20 ___ ___ ___ 10.50 ___ ___ ___
30 ___ ___ 110 ___ ___ ___ ___
40 255 ___ ___ ___ ___ ___ ___
50 ___ ___ ___ ___ ___ 3 ___
60 ___ ___ ___ ___ ___ ___ 3
70 ___ ___ ___ 5 ___ ___ ___
80 ___ ___ 295 ___ ___ ___ ___
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Attached file(s):

Week 3 questions.doc  View File