Exhibit 22-12

Variable Input Fixed Input Quantity of Output Marginal Physical Product

 Calculation of marginal physical product (MPP) from information given in Exhibit 22-12

Marginal physical product (MPP) is defined as the change in the level of output due to a
change in the level of variable input. It is calculated as:

MPP = (change in the level of output)/(change in the level of variable input)

Marginal physical product (MPP) of the first unit of labor = (12-0)/(1-0) = 12 = A and so on

188. Refer to Exhibit 22-12 above. The numbers that go in blanks (A), (B), (C), and (D),
respectively, are
a.12, 13, 14 and 12.
b.12, 25, 39 and 51.
c.12, 11, 10 and 9.
d.12, 14, 13 and 11.
e.none of the above

Sol: The correct answer is (a): 12, 13, 14 and 12.

 Explanation:

As observed from the table above in Exhibit 22-12 that shows calculation of marginal
physical product (MPP), marginal physical product of the numbers that go in blanks (A), (B),
(C), and (D), respectively, are 12, 13, 14 and 12.

 
 
 
Exhibit 22-13
Quantity Total Average Total Average Total Average Marginal
of Output Fixed Fixed Variable Variable Cost(TC) Total Cost
Cost Cost Cost Cost Cost (MC)
(TFC) (AFC) (TVC) (AVC) (ATC)

0 $200 -- $0 -- $200
1 $200 (A)= 200 30 (H)=30 230 (M)=230 (S)=30
2 $200 (B)= 100 50 (I)=25 250 (N)=125 (T)=20
3 $200 (C)=66.67 (F)=80 $26.67 (K)=280 (P)=93.33 (U)=30
4 $200 (D)=50 130 (J)=32.5 330 (Q)=82.5 (V)=50
5 $200 (E)=40 (G)= 200 $40 (L)=400 (R)=80 (W)=70

 Average fixed cost (AFC) is total fixed cost (TFC) divided by quantity of output (Q). It is
calculated as:
Average fixed cost (AFC) = TFC /Q

AFC at (Q = 1) = 200/1 = 200 = (A) and the same can be done for (B), (C), (D) and (E).

Average variable cost is total variable cost (TVC) divided by quantity. It is calculated as:
Average variable cost (AVC) = TVC/ Q

⇒ TVC = AVC*Q

TVC at (Q = 3) = 26.67*3 = 80 = (F) and the same can be done for (G).

Average variable cost (AVC) = TVC/ Q

AVC at (Q = 1) = 30/1 = 30 = (H) and the same can be done for (I) and (J).

Total cost is sum of total fixed cost and total variable cost (TVC). It is calculated as:

Total cost (TC) = TFC + TVC

TC (Q = 3) = 200 + 80 = 280= (K) and the same can be done for (L).

Average total cost (ATC) is total cost (TC) divided by quantity of output (Q). It is calculated
as:
Average total cost (ATC) = TC /Q

ATC at (Q = 1) = 230/1 = 230 = (M) and the same can be done for (N), (P), (Q) and (R).

Marginal cost function (MC) is the cost added by producing one additional unit of a product.
It is calculated as

MC = (change in TC)/ (change in total quantity of output)

MC at (Q = 1) = (230 – 200)/(1 – 0) = 30/1 = 30= (S) and the same can be done for (T), (U),
(V) and (W).
 
 
189. Refer to Exhibit 22-13.  What dollar amounts go in blanks (A) and (B)?
a.$200; $100
b.$200; $200
c. $50; $100
d.$10; $100
e.There is not enough information to answer this question.
 

 Sol: The correct answer is (c): $50; $100.

 Explanation:

As observed from the table above in Exhibit 22-13 that shows calculation of AFC, TVC,
AVC, TC, ATC and MC, the dollar amounts go in blanks (A) and (B) is $50; $100.

 
190.Refer to Exhibit 22-13.  What dollar amounts go in blanks (C) and (D)?
a.$100; $50
b.$25; $68
c.$200; $200
d. $66.67; $50
e.There is not enough information to answer this question.
 

  Sol: The correct answer is (d): $66.67; $50.

 Explanation:

As observed from the table above in Exhibit 22-13 that shows calculation of AFC, TVC,
AVC, TC, ATC and MC, the dollar amounts go in blanks (C) and (D) is $66.67; $50.

 
191.Refer to Exhibit 22-13.  What dollar amounts go in blanks (E) and (F)?
a.$200; $30
b.$40; $80
c.$200; $15
d.$3; $40
e.There is not enough information to answer this question.

   Sol: The correct answer is (b): $40; $80.

As observed from the table above in Exhibit 22-13 that shows calculation of AFC, TVC,
AVC, TC, ATC and MC, the dollar amounts go in blanks (E) and (F) is $40; $80.

 
 
192.Refer to Exhibit 22-13.  What dollar amounts go in blanks (G) and (H)?
a.$100; $30
b.$400; $50
c.$200; $30
d.$40; $20
e.There is not enough information to answer this question.
 
Sol: The correct answer is (c): $200; $30.

 Explanation:

As observed from the table above in Exhibit 22-13 that shows calculation of AFC, TVC,
AVC, TC, ATC and MC, the dollar amounts go in blanks (G) and (H) is $200; $30.

 
193.Refer to Exhibit 22-13.  What dollar amounts go in blanks (I) and (J)?
a.$100; $50
b.$25; $32.50
c.$500; $40
d.$50; $32
e.There is not enough information to answer this question.
 

  Sol: The correct answer is (b): $25; $32.50.

 Explanation:

As observed from the table above in Exhibit 22-13 that shows calculation of AFC, TVC,
AVC, TC, ATC and MC, the dollar amounts go in blanks (I) and (J) is $25; $32.50.

 
194.Refer to Exhibit 22-13.  What dollar amounts go in blanks (K) and (L)?
a.$280; $400
b.$28; $40
c.$260; $360
d.$50; $400
e.There is not enough information to answer this question.
 

   Sol: The correct answer is (a): $280; $400.

As observed from the table above in Exhibit 22-13 that shows calculation of AFC, TVC,
AVC, TC, ATC and MC, the dollar amounts go in blanks (K) and (L) is $280; $400.

 
195.Refer to Exhibit 22-13.  What dollar amounts go in blanks (M) and (N)?
a.$200; $125
b.$120; $150
c.$230; $125
d.$150; $300
e.There is not enough information to answer this question.
 

 Sol: The correct answer is (c): $230; $125.

 Explanation:

As observed from the table above in Exhibit 22-13 that shows calculation of AFC, TVC,
AVC, TC, ATC and MC, the dollar amounts go in blanks (M) and (N) is $230; $125.

 
196.Refer to Exhibit 22-13.  What dollar amounts go in blanks (P) and (Q)?
a.$120; $125
b.$10; 95
c.$30; $80
d.$93.33; $82.50
e.There is not enough information to answer this question.

 Sol: The correct answer is (d): $93.33; $82.50.

 Explanation:

As observed from the table above in Exhibit 22-13 that shows calculation of AFC, TVC,
AVC, TC, ATC and MC, the dollar amounts go in blanks (P) and (Q) is $93.33; $82.50.

 
 
197.Refer to Exhibit 22-13.  What dollar amounts go in blanks (R) and (S)?
a.$80; $20
b.$80; $30
c.$30; $30
d.$130; $50
e.There is not enough information to answer this question.
 

 Sol: The correct answer is (b): $80; $30.

As observed from the table above in Exhibit 22-13 that shows calculation of AFC, TVC,
AVC, TC, ATC and MC, the dollar amounts go in blanks (R) and (S) is $80; $30.

 
198.Refer to Exhibit 22-13.  What dollar amounts go in blanks (T) and (U)?
a.$10; $10
b.$20; $50
c.$20; $30
d.$42; $40
e.There is not enough information to answer this question.
 

 Sol: The correct answer is (c): $20; $30.

 Explanation:

As observed from the table above in Exhibit 22-13 that shows calculation of AFC, TVC,
AVC, TC, ATC and MC, the dollar amounts go in blanks (T) and (U) is $20; $30.

 
199.Refer to Exhibit 22-13.  What dollar amounts go in blanks (V) and (W)?
a.$50; $70
b.$12.50; $14
c.$140; $150
d.$82.50; $80
e.There is not enough information to answer this question.
 

 Sol: The correct answer is (a): $50; $70.

 Explanation:

As observed from the table above in Exhibit 22-13 that shows calculation of AFC, TVC,
AVC, TC, ATC and MC, the dollar amounts go in blanks (V) and (W) is $50; $70.