Before beginning this assignment, make sure you have gone carefully through all of the required readings for this module. It is very important to carefully absorb both the general concepts as well as the numerical examples in the background readings. For this assignment, you will have to answer some purely conceptual questions as well as some numerical problems. For conceptual questions, make sure to thoroughly explain your answers and to cite specific readings from the required background materials to explain your answers. For numerical problems, make sure to show all of your work and explain how you arrived at your answers (partial credit can be given if you get the final answer wrong but do some of the steps correctly). Note that you need to use Microsoft Excel to do the graphs for the numerical problems.
Part A: Conceptual questions
Part B: Quantitative problems
The following table gives the total weekly output of bicycles at Al’s Bicycle Town.
Table 1
Labor Total Product (TP) Average Product of labor (AP) Marginal Product of labor (MP)
0 0 na na
1 100 100 100
2 300 —– ___
3 450 ___ ___
4 ___ ___ 110
5 630 ___ ___
6 ___ 110 ___
The cost of 1 worker is $2000 per month. Total fixed cost is $4000 per month.
Table 2
Labor Total Product (TP) Total variable cost (TVC) Total cost (TC)
0 0 na 4000
1 100 2000 ___
2 300 —– ___
3 450 ___ ___
4 ___ ___ 12000
5 630 ___ ___
6 ___ 12000 ___
Table 3
Total Product (TP) Average variable cost (AVC) Average total cost (ATC) Marginal cost (MC)
0 na na na
100 20 ___ 20
300 —– ___ ___
450 ___ ___ ___
___ ___ 21.43 ___
630 ___ ___ ___
___ ___ ___ 66.67
To start off this module, watch the following videos which will give you an introduction to some of the main concepts for this module. Pay special attention to the discussion about fixed versus variable costs and accounting versus economic profit:
Clifford, J., & Hill. J. (2016). Revenues, profits, and price. CrashCourse. https://www.youtube.com/watch?v=UWImfFax8Ew
The following book will give you a relatively simple introduction to the key concepts covered in the module. In addition to the concepts, make sure to go carefully through the numerical examples. Read Chapter 7 of the following book (use the “Contents†tab to navigate though Sections 7.1, 7.2., and 7.3):
Taylor, T. (2014) Principles of Microeconomics. OpenStax College. http://cnx.org/contents/6i8iXmBj@11.2:75YRzeYw@8/Introduction-to-Cost-and-Indus
Now go to this slightly more advanced book chapter that will cover the concepts from this module from the point of view of a business manager. Pay special attention to the tables and numerical examples:
Marburger, D. R., & Peterson, R. (2013). Chapter 4: What your cost accountant can’t measure: The economic theory of production and costs. Economic Decision Making Using Cost Data: A Manager’s Guide. New York, NY: Business Expert Press. [EBSCO eBook Collection. Note: to find the book enter only the title of the book in the library search engine]