13 Marty’s Frozen Yogurt is a small shop that sells cups of frozen Chapter 12 #3Marty’s Frozen Yogurt is a small shop that sells cups of frozenyogurt in a university town. Marty owns three frozen-yogurtmachines. His other inputs are refrigerators, frozen-yogurt mix,cups, sprinkle toppings, and, of course, workers. He estimatesthat his daily production function when he varies the numberof workers employed (and at the same time, of course, yogurtmix, cups, and so on) is as shown in the accompanying table.
14 Marty pays each of his workers $80 per day. The Chapter 12 #3Marty pays each of his workers $80 per day. Thecost of his other variable inputs is $0.50 per cup of yogurt. Hisfixed cost is $100 per day.a. What is Marty’s variable cost and total cost when he produces110 cups of yogurt? 200 cups? Calculate variableand total cost for every level of output given in Problem 2.b. Draw Marty’s variable cost curve. On the same diagram,draw his total cost curve.c. What is the marginal cost per cup for the first 110 cups ofyogurt? For the next 90 cups? Calculate the marginal costfor all remaining levels of output.
18 Chapter 12 #4a. For each of the given levels of output, calculate the averagefixed cost (AFC), average variable cost (AVC), andaverage total cost (ATC) per cup of frozen yogurt.b. On one diagram, draw the AFC, AVC, and ATC curves.c. What principle explains why the AFC declines as outputincreases? What principle explains why the AVC increasesas output increases? Explain your answers.d. How many cups of frozen yogurt are produced when averagetotal cost is minimized?
25 Chapter 13 QuestionsWhy does the marginal cost curve intersect the average variable and average total cost curves at their respective minimum points?If a firm wished to minimize its cost of production then what output level should it produce?How can the extent to which economies or diseconomies of scale are experienced help us to predict the size and number of real-world firms in an industry?
26 7. Why do marginal costs of production rise? Chapter 13 Questions4. Some companies advertise: "We deal in high volume and pass our savings on to you in the form of lower prices." How could this be?5. Many people search out and purchase "bargains" at garage and yard sales. What are some implicit costs associated with this type of shopping?6. Is the "best" quantity of workers to hire where the marginal productivity of the last worker employed is the greatest (which implies an output level in which the marginal cost of producing additional units is the cheapest)?7. Why do marginal costs of production rise?