ECON 213 Problem Set ch. 8 Liberty University Solution

The following table shows a short-run production function for yoga pants. Use the data to determine where diminishing marginal product begins.

Diminishing marginal product begins when the company hires worker number

A regional airline sells 200 tickets to New York City for an average price of $ 175 one way. Half of the people on the flight will purchase a meal for $5. The airline’s employee costs per flight include $500 each for the pilot and copilot, and $200 for each flight attendant. The law requires airlines to have at least one pilot, copilot, and flight attendant for each flight. Fuel for the flight is expected to cost $10000, and the cost of catering food is $1 for each item purchased.

The airline earns https://sw5.wwnorton.com/problemsets/images/blank.png $ in revenue from tickets and https://sw5.wwnorton.com/problemsets/images/blank.png $ from in-flight purchases.

If one flight attendant is staffed for the flight, the airline pays https://sw5.wwnorton.com/problemsets/images/blank.png $ in fixed costs.

If the airline has three flight attendants for the flight, the firm earns https://sw5.wwnorton.com/problemsets/images/blank.png $ profit.

What happens to profit in each of the following scenarios, given the information in Part 1 above?

You and your friends have decided to build a skateboard ramp behind your house. You have already purchased $400 in materials and are considering renting an electric saw. It costs $20/hour to rent an electric saw. You estimate it will take 6 hours to build the ramp. If you decide to use your saw, which is a handsaw, you will not have to pay anything to rent an electric saw, but it will take 15 hours to build the ramp. Regardless of the decision, you will need to ask for time off from your job, which pays $12/hour.

Based on the information provided above, answer the following questions. (a) If you use your handsaw, the explicit costs of the ramp are https://sw5.wwnorton.com/problemsets/images/blank.png $ .

(b) The explicit costs of the ramp are https://sw5.wwnorton.com/problemsets/images/blank.png $ if you rent an electric saw.

(c) If you use a handsaw, the implicit costs of the ramp are https://sw5.wwnorton.com/problemsets/images/blank.png $ .

(d) If you rent an electric saw, the implicit costs of the ramp are https://sw5.wwnorton.com/problemsets/images/blank.png $ .

(e) It is economically cheaper to

The cookie company in the mall hires only labor to produce cookies. The workers are paid $80 per day, and the cost of renting the space in the mall is $350 per day.

The daily fixed costs of production are

The labor cost per day of hiring two workers is https://sw5.wwnorton.com/problemsets/images/blank.png $ .

The total cost per day when three workers are hired is https://sw5.wwnorton.com/problemsets/images/blank.png $ .

The marginal product per day of the fourth worker is https://sw5.wwnorton.com/problemsets/images/blank.png cookies.

Use the table below to answer questions about a firm’s hiring decision.

What is the total cost when the marginal product of labor is 10?

What is the total variable cost when the marginal product of labor is equal to 5?

You and a group of friends are planning to visit a theme park, which charges $60 for admission, $90 for a two-day pass, and $110 for a three-day pass. Your friends are interested in spending a lot of time there, but they’re worried about paying a lot of money. You explain the concept of marginal cost, which helps them see that the additional day is a good value.

The average cost per day of a three-day pass is https://sw5.wwnorton.com/problemsets/images/blank.png $ per person.

The marginal cost of adding the third day is https://sw5.wwnorton.com/problemsets/images/blank.png $ per person.

If there are 8 people in your group, the group's marginal cost of switching from the two-day pass to the three-day pass is