Question 5 – ALL CALCULATIONS MUST BE SHOWN

The table below contains information about weekly production and costs of a firm.

Number of Workers	Output (units)		Marginal Product of Labour		Fixed Cost (capital)		Variable Cost (labour)	Total Cost	Marginal Costs		Average Fixed Costs		Average Variable Costs		Average Total Costs
0		--				--		--		--				--
1				330				$600				$300
2				375				$600				$1,200
3				1020				$600				$1,500
4				1260				$600				$1,200
5				150				$600				$2,100
6				1470				$600				$1,800

a. Complete the table. There are 40 empty cells. 

b. In one particular week the firm breaks exactly even. If the firm's revenue for the week is $900, what is the level of output sold?

c. Is there a level of output at which diminishing returns to labour commence? If so identify this level of output and explain why diminishing returns to labour might occur. 

d. The price currently received by the firm is $1.80 for each unit of output. The firm has received an order for 2,000 units of output per week for the next two months. If the firm expects the trend in the marginal product of labour will continue in the same direction, should the firm commit to the order? Explain your answer. 

e. Plot each of the following curves for the firm on a single diagram.

i. Average variable costs

ii. Average total costs

iii. Marginal costs

iv. Average fixed costs

Illustrate and explain which of the curves will shift, and in which direction, due to an increase in the cost of labour. Hint: use the definitions of the different costs to assist in determining which costs will change.