Group+3+Cost+Curves

=Group 3: Cost Curves=

Each worker at Gallo's cork factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of corks produced. Please complete the following table and answer the questions below.


 * **Number **

**of **

**Workers ** || **Number **

**of **

**Machines ** || **Output **

**(corks produced **

**per hour) ** || **Marginal Product **

**of Labor ** || **Cost of Workers ** || **Cost of Machines ** || **Total Cost ** || **Marginal Cost ** ||
 * <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">1 || <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">2 || <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">5 ||  ||   ||   ||   ||   ||
 * <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">2 || <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">2 || <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">10 ||  ||   ||   ||   ||   ||
 * <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">3 || <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">2 || <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">20 ||  ||   ||   ||   ||   ||
 * <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">4 || <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">2 || <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">35 ||  ||   ||   ||   ||   ||
 * <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">5 || <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">2 || <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">55 ||  ||   ||   ||   ||   ||
 * <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">6 || <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">2 || <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">70 ||  ||   ||   ||   ||   ||
 * <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">7 || <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">2 || <span style="color: #000000; display: block; font-family: 'Times New Roman','serif'; text-align: center;">80 ||  ||   ||   ||   ||   ||

<span style="color: #000000; font-family: 'Times New Roman','serif';">A. Over what range of workers does labor exhibit diminishing marginal productivity? <span style="color: #000000; font-family: 'Times New Roman','serif';">B. On a well-annotated graph, provide a rough sketch of the firm’s average variable costs (AVC), average fixed costs (AFC), average total costs (ATC), and marginal costs (MC). <span style="color: #000000; font-family: 'Times New Roman','serif';">C. If cork production is a competitive market and the market price of corks is $0.60, how many corks should the firm produce? How many workers’ should it hire? Illustrate on the graph the firms’ profits from cork production.