Microeconomics/Capital and Labor Requirements

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You are assigned the task of computing the variable capital and
labor costs for Cost Cutters production level. Below is a table with
the capital and labor requirements for ten different levels of
production.

Production Level

Capital

VC$12

Labor

VC$6

TVC

MC

AVC

0

0

0

1

3

6

2

6

10

3

9

13

4

12

16

5

15

20

6

18

25

7

21

31

8

24

38

9

27

46

10

30

55

Complete the table and answer the following:

  • Assuming the price of labor is $6 per unit and the price of
    capital is $12 per unit; compute the total variable costs, the marginal
    costs, and the average variable costs for the firm.
  • Using the numbers that you calculated above, explain the
    relationship between the marginal cost and average variable cost. Using
    the same numbers, explain the “marginal cost” in terms of additional
    inputs needed to produce a marginal unit of output.
  • If the output price was $62, how many units of output would the firm produce? Explain. Please show work.

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