Course materials

1. ASSIGNMENT 1Module 2 – CaseProduction and CostsAssignment
OverviewBefore beginning this assignment, make sure you have gone
carefully through all of the required readings for this module. It is ver
ASSIGNMENT 1Module 2 – CaseProduction and CostsAssignment OverviewBefore
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.Case AssignmentPart A: Conceptual questionsSuppose you own a television
factory and at your current level of output you have average total cost of $800 per
television, average variable costs of $700 per television, and a marginal cost of $400. If the
price your buyers are willing to pay is $500, should you decrease or increase
production? Explain your reasoning, and make sure to cite at least one of the required
readings in your answer.You are the owner of a restaurant, and currently you have only one
waiter. While this keeps costs down, many of your customers go home because they are
tired of waiting in line or waiting for their order. You hire four more waiters and
waitresses, and you are now able to serve a dramatically higher number of
customers. Seeing the huge productivity gains from hiring more staff, you then hire 20
more waiters and waitresses. However, you are not able to serve any more customers than
you were able to when your staff size was only four. In fact, your restaurant has become
overly crowded because there is not enough room in your restaurant for all of your
staff. You are confused as to why hiring four more staff members increased your
productivity, but hiring 20 more did not. What concept from the background readings best
describes what happened in this case? Explain your reasoning.Part B: Quantitative
problemsThe following table gives the total weekly output of bicycles at Al’s Bicycle
Town.Table 1Labor Total Product (TP) Average Product of labor (AP) Marginal Product
of labor
(MP)0 0 na na1 100

2. 100 1002 300 —–
___3 450 ___ ___4
___ ___ 1105 630 ___
___6 ___ 110 ___Complete
this table.Draw the graphs of the marginal product (MP) and the average product (AP).To
learn how to plot the data in Excel,
see https://www.youtube.com/watch?v=B3U9tDcoNeIWhere do the AP and MP curve
cross?The cost of 1 worker is $2000 per month. Total fixed cost is $4000 per
month.Complete Table 2 using your answers from Table 1 and by computing total variable
cost (TVC) and total cost(TC).Table 2Labor Total Product (TP) Total variable cost
(TVC) Total cost
(TC)0 0 na 40001 100
2000 ___2 300 —–
___3 450 ___ ___4
___ ___ 120005 630 ___
___6 ___ 12000 ___Draw
the graphs of the TC and TVC curves. What is the relationship between these two
curves?Complete Table 3 by using your answers from the previous Tables and calculating
the AVC, ATC, and MC.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 ___ ___ ___ ___
___ ___ 66.67Draw the graphs of the ATC, AVC, and MC
curves. What is the relationship between the ATC and AVC curves? Between the MC and
AVC curves?