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12 marksTheory of Supply

CAPE Economics Unit 1 · 2005 · Paper 2 · Question 1(a)

A table shows labour inputs (L) from 0 to 6 and output (Q) up to 300 for John and Sons Ltd. Annual wages are 10 000 annually per worker (VC). Product price is 200.

Copy and complete the table for APP, MPP, AVC, and MC.

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Other parts of this question

  1. 1(b)(i)Define Average Physical Product (APP) OR provide the formula for calculating it.[2 marks]
  2. 1(b)(ii)Define Marginal Physical Product (MPP) OR provide the formula for calculating it.[2 marks]
  3. 1(b)(iii)Define Average Variable Cost (AVC) OR provide the formula for calculating it.[2 marks]
  4. 1(b)(iv)Define Marginal Cost (MC) OR provide the formula for calculating it.[2 marks]
  5. 1(c)State what happens to average physical product (APP) and marginal physical product (MPP) as output increases.[2 marks]
  6. 1(d)State what happens to average variable cost (AVC) and marginal cost (MC) as output increases.[2 marks]
  7. 1(e)(i)Explain how output will be affected when a variable input is added to a fixed input.[4 marks]
  8. 1(e)(ii)Explain how increasing levels of output affect costs.[4 marks]
  9. 1(f)Draw a diagram showing the marginal cost curve (MC) and the price ($200) of the product.[12 marks]
  10. 1(g)Identify what level of output the firm will produce and state how you arrived at your answer.[6 marks]

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