April 2023 Q27

[Jack Jamieson]

Hi, at the risk of asking a daft question or simply missing the point entirely, I'm really not sure how to obtain the answers to parts iii and iv of this question. I got parts i & ii by calculating the product of the average and units and then taking the difference to get the marginals at each unit of labour, but my attempt at iii was way off the answer of 10.56 and then similarly for part iv

 

[Richie Holway]

Hi Jack,

For part (iii), you first need to work out the total cost when four units of labour are employed. So this will be 4 multiplied by the cost of each unit of labour plus any capital costs. Once you have that total cost when four units of labour are employed, you can divide it by the output that results from four units of labour (and you mention above that you already have this number as it was needed as an intermediate step before getting the marginals).

Hopefully this helps. Once you've worked out part (iii), (iv) is likely to be easier, but do let me know if you're still unsure of anything.

Thanks,
Richie

 

[Jack Jamieson]

Hi Jack,

For part (iii), you first need to work out the total cost when four units of labour are employed. So this will be 4 multiplied by the cost of each unit of labour plus any capital costs. Once you have that total cost when four units of labour are employed, you can divide it by the output that results from four units of labour (and you mention above that you already have this number as it was needed as an intermediate step before getting the marginals).

Hopefully this helps. Once you've worked out part (iii), (iv) is likely to be easier, but do let me know if you're still unsure of anything.

Thanks,
Richie

Thanks Richie, yes I had another look at it the next morning with fresh eyes and figured it out then. Thank you for clarifying though!