Economics

ECON 1030: Micro- and Macro-economics II

Homework Assignment 3

(Due on Oct. 14, 2019)

1. The production function of Taco’s Barbershop is shown in the first two columns in the following table (read from the left):

# of barbers	Total haircuts per day (TP)	MP	AP
0	0
1	10
2	36
3	60
4	72
5	78
6	81

a. Calculate and fill in the MP-column.

b. Over what range (# of barbers hired) is the MP of barbers increasing? constant? diminishing?

c. Graph the TP-column and MP-column in two separate diagrams, where in both cases the # of barbers is on the horizontal-axis.

d. Calculate and fill in the AP-column.

2.

a. Fill in the blank columns in the following table:

b. Plot the TFC-, TVC-, and TC-curves in one graph.

c. Plot the AFC-, AVC-, and ATC-curves in one graph.

d. Plot the MC- and ATC-curves in one graph.

Total output	TFC	TVC	TC	MC	AFC	AVC	ATC
0	$1,000	$0
1	$1,000	$360
2	$1,000	$840
3	$1,000	$1,440
4	$1,000	$2,160
5	$1,000	$3,000
6	$1,000	$3,960
7	$1,000	$5,040
8	$1,000	$6,240
9	$1,000	$7,560
10	$1,000	$9,000

3. The production function of Brutus’s Barbershop is shown in the first two columns in the following table (read from the left):

# of barbers	Total haircuts per day	MP	TVC	MC per barber	MR per barber	MC per haircut	MR per haircut
0	0
1	12
2	36
3	60
4	82
5	101
6	116
7	126
8	130

a. Fill in the blanks in the MP-column.

b. If it costs $200 to hire each barber, compute the TVC- and MC-columns.

c. If you are given the information that TFC = $500 and that the market price in the competitive haircut industry is $20 per haircut, what is the profit-maximizing number of barbers to hire?