**ECO 550 Week_3_Problem_Set_answers**

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- Suppose that a firm’s only variable input is labor. When 50 workers are used, the average product of labor is 50, and the marginal product of the 50
^{th}worker is 75. The wage rate is $80, and the total cost of the fixed input is $500.

- What is average variable cost? Show your calculations.

*Total product would be average product times the number of workers: 50 * 50 = 2500. *

*Total variable cost would be number of workers times the wage rate: 50 * 80 = 4000*

*Average variable cost would be 4000/2500= 1.6*

- What is marginal cost? Show your calculations.

*The marginal product of the 50 ^{th} worker is 75. The cost to hire this worker was $80. Therefore, the marginal cost would be $1.06. *

- What is average total cost? Show your calculations.

*Total cost equals total variable cost plus total fixed costs: 4000 + 500 = 4500.*

*Average total cost would be 4500/2500 = 1.8*

**Category:**Business, General Business

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