The cookie company in the mall hires only labor to produce cookies. The workers are paid $85 per day, and the cost of renting the space in the mall is $250 per day.

Number of workers Daily output (cookies)
1 200
2 400
3 600
4 700

The daily fixed costs of production are:A. $335 .B. $85 .C. $0.D. $170 .E. $250 .

The labor cost per day of hiring two workers is$ .

The total cost per day when three workers are hired is$ .

The marginal product per day of the fourth worker iscookies.

The answers are:

a. The daily fixed costs of production are: $250

b. The labor cost per day of hiring two workers is $170

c. Total cost per day when three workers are hired is $505

d The marginal product per day of the fourth worker is 100 cookies

Explanation:

Let me explain each of the choices one by one

a. Fixed cost is the cost of production that does not change with change in the production volume or certain other conditions. In this example, the daily fixed cost is the cost in renting the mall and it is $250

b. The labor cost for hiring one worker was given as $85, hence for two workers the cost will be $85 × 2 = $170

c. The total cost per day refers to the cost of renting the mall per day plus the cost of hiring the workers and for three workers, the total cost per day equals:

Cost for hiring three workers + cost of renting mall space

= ($85 × 3) + ($250) = $505

d. The marginal product per day of the fourth worker is seen in observing the difference in trend from when the first  to the  fourth workers were hired. as the number of workers increased from 1 to 3, the number of cookies produced daily increased from 200 to 600, which means:

worker one produced 200 cookies (given) hence 200 is the marginal product of worker one

workers 1 and 2 produced 400 cookies, which means workers 1 and 2 produces 200 cookies each. making their marginal product = 200 each

workers 1, 2 and 3 produced 600 cookies which is 200 + 200 + 200, hence their marginal product per day is 200 cookies.

But, on hiring the fourth worker, workers 1, 2, 3 and 4 produced 700 cookies, which means that in addition to the 200 cookies  each produced by workers 1, 2 and 3, worker 4 produced only 100 cookies, making his marginal product per day to be 100 cookies

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