Numerical Example

Assumptions: Each unit of the variable resource (labor) earns $20/day. Fixed costs are $50.

Units of Variable Resource Total Product Marginal Product Average Product Fixed Costs Total Variable Costs Total Cost Marginal Cost Average Variable Cost Average Total Cost
0 0 50
1 8 8 8
2 20 12 10
3 34 14 11.3
4 46 12 11.5
5 56 10 11.2
6 64 8 10.7
7 70 6 10
8 74 4 9.3
9 75 1 8.3


The Solution

Units of Variable Resource Total Product Marginal Product Average Product Fixed Costs Total Variable Costs Total Cost Marginal Cost Average Variable Cost Average Total Cost
0 0 $50.00 0 $50.00
1 8 8 8 $50.00 $20.00 $70.00 $2.50 $2.50 $8.75
2 20 12 10 $50.00 $40.00 $90.00 $1.67 $2.00 $4.50
3 34 14 11.3 $50.00 $60.00 $110.00 $1.43 $1.76 $3.24
4 46 12 11.5 $50.00 $80.00 $130.00 $1.67 $1.74 $2.83
5 56 10 11.2 $50.00 $100.00 $150.00 $2.00 $1.79 $2.68
6 64 8 10.7 $50.00 $120.00 $170.00 $2.50 $1.88 $2.66
7 70 6 10 $50.00 $140.00 $190.00 $3.33 $2.00 $2.71
8 74 4 9.3 $50.00 $160.00 $210.00 $5.00 $2.16 $2.84
9 75 1 8.3 $50.00 $180.00 $230.00 $20.00 $2.40 $3.07


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This page was last modified Monday, February 3, 1997.