Suppose that you and your roommate have started a bagel delivery service on campus. List some of your fixed costs and describe why they are fixed. List some of your variable costs and describe why they are variable.

Compare the column for the average total cost with the column for marginal cost. Explain the relationship.

Compare the column for a marginal product with the column for marginal cost. Explain the relationship.

Now fill in the column for marginal cost.

Fill in the column for the average total cost. (Recall that $A T C=T C / Q$.) What pattern do you see?

A worker costs $100 a day, and the firm has fixed costs of$200. Use this information to fill in the column for total cost.

Nimbus, Inc. makes brooms and sells them door-todoor. Here is the relationship between the number of workers and Nimbus's output during a given day:

$$\begin{array}{c|c|c|c|c|c} \text { Workers } & \text { Output } & \begin{array}{c} \text { Marginal } \\ \text { Product } \end{array} & \begin{array}{c} \text { Total } \\ \text { Cost } \end{array} & \begin{array}{c} \text { Average } \\ \text { Total } \\ \text { Cost } \end{array} & \begin{array}{c} \text { Marginal } \\ \text { Cost } \end{array} \\ \hline 0 & 0 & & & - & \\ \hline 1 & 20 & & & - & \\ \hline 2 & 50 & & - & & \\ \hline & & & & & \\ \hline 3 & 90 & & & & \\ \hline 4 & 120 & & & & \\ \hline & & - & & & \\ \hline 5 & 140 & & & & \\ \hline & & - & & & \\ \hline 6 & 150 & & & & \\ \hline 7 & 155 & & & & \\ \hline \end{array}$$

Fill in the column of marginal products. What pattern do you see? How might you explain it?

Define total cost, average total cost, and marginal cost. How are they related?

A commercial fisherman notices the following relationship between hours spent fishing and the quantity of fish caught:

$$\begin{aligned} &\begin{array}{lc} &\text { Quantity of Fish }\\ \text { Hours } & \text { (in pounds) } \\ \hline 0 \text { hours } & 0 \mathrm{lb} . \\ 1 & 10 \\ 2 & 18 \\ 3 & 24 \\ 4 & 28 \\ 5 & 30 \end{array} \end{aligned}$$

The fisherman has a fixed cost of $\$ 10$ (his pole). The opportunity cost of his time is $\$ 5$ per hour. Graph the fisherman's total-cost curve. Explain its shape.

A commercial fisherman notices the following relationship between hours spent fishing and the quantity of fish caught:

$$\begin{aligned} &\begin{array}{lc} &\text { Quantity of Fish }\\ \text { Hours } & \text { (in pounds) } \\ \hline 0 \text { hours } & 0 \mathrm{lb} . \\ 1 & 10 \\ 2 & 18 \\ 3 & 24 \\ 4 & 28 \\ 5 & 30 \end{array} \end{aligned}$$

Use these data to graph the fisherman's production function. Explain its shape.

A commercial fisherman notices the following relationship between hours spent fishing and the quantity of fish caught:

$$\begin{aligned} &\begin{array}{lc} &\text { Quantity of Fish }\\ \text { Hours } & \text { (in pounds) } \\ \hline 0 \text { hours } & 0 \mathrm{lb} . \\ 1 & 10 \\ 2 & 18 \\ 3 & 24 \\ 4 & 28 \\ 5 & 30 \end{array} \end{aligned}$$

What is the marginal product of each hour spent fishing?

Draw a production function that exhibits diminishing marginal product of labor. Draw the associated total-cost curve. (In both cases, be sure to label the axes.) Explain the shapes of the two curves you have drawn.

Suppose that your college charges you separately for tuition and for room and board.

What is a cost of attending college that is not an opportunity cost?

What is marginal product, and what does it mean if it is diminishing?