BT 244 Week 8 Homework

1

a) The energy required to keep a company in function regardless of the
amount of output represents a fixed cost. For example, irrespective of the
number of goods being produced, the cost of operating an office will remai
constant. On the other hand, the more goods being produced, the more
machinery that will be used. In this case, the energy is a variable cost
because the amount of machinery needed will increase along with the
amount of goods being produced.

b). If the fixed cost increases, the average
total cost curve will shift upwards as it
will increase as well. However, the
marginal cost curve will remain the same,
because the cost of producing a single
unit of good has not altered.


c). Corn is an input for the production of ethanol, so the more corn there
is, the more ethanol is produced. Therefore it is a variable cost.

d) When a variable cost increases, both the
ATC and MC curves will rise.

, 2 a) Fixed inputs: frozen-yogurt machines, refrigerators, and the shop.
Variable inputs: frozen-yogurt mix, cups, sprinkle toppings, and workers




c)
First worker: 110
Second worker: 90
Third worker: 70
Due to the principle of diminishing returns, the marginal product declines as
more workers are added.