1. Ch. 13 Study Guide WorkersQMPLCost of Factory Cost of Workers TC 00250 166 530 2115251035 3154251540 4183252045 520225 50 B. Plot the Production Function D. and TC curve

2. 2c. What happens to the MPL as more workers are added to the production facility? Why? Use this information about the MPL to explain the slope of the production function. MPL decreases as more workers are added Each worker has to share fixed inputs As input increases, Q increases but at a slower rate and the slope of production function gets flatter

3. 2e. Explain the shape of the TC curve As Q increases, and DMP sets in, the TC gets steeper. In order to produce more Q, the firm must employ greater amounts of input and costs rise at an increasing rate.

4. QFCVCTCAFCAVCATCMC 0160 -- 116183416183418 2163147815.5023.5013 31641575.3313.671910 4164965412.2516.258 51659753.211.81510 61672882.671214.6713 716901062.2912.8615.1418 816114130214.2516.2524 9161451611.7816.1117.8831 10161842001.618.402039 3b. Plot AFC, AVC, ATC, and MC

5. 3c Explain the shape of curves in 2b AFC- FC divided by increasing Q so always falling AVC, ATC, MC : all fall and then rise because of increasing MP followed by decreasing MP ATC: high at low levels of Q b/c of FC is spread over only a few units; will drop as Q increases; ATC rises because even as AFC falls, AVC rises substantially

6. 3d. Explain relationship between ATC and MC When MC < ATC, ATC falling When MC > ATC, ATC rising MC crosses ATC at min of ATC = Efficient Scale 3e. Explain ATC, AFC, AVC ATC = AFC + AVC Distance between ATC and AVC = AFC; and that distance is always getting smaller

7. 3f What is Bob’s efficient scale? How to find? QFCVCTCAFCAVCATCMC 0160 -- 116183416183418 2163147815.5023.5013 31641575.3313.671910 4164965412.2516.258 51659753.211.81510 61672882.671214.6713 716901062.29128615.1418 816114130214.2516.2524 9161451611.7816.1117.8831 10161842001.618.402039