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Week 9 · Assignment: Traditional alternative (no AI)

Week 9 — Counting Costs: Marginal, Average, and the Owner's Time — Traditional alternative (no AI)

Principles of Microeconomics Free sample edition
Traditional alternative (no AI), unpublished. In the course this is a separate assignment that ships unpublished beside the adaptive assignment: same objective, no AI. An instructor who prefers it publishes it and unpublishes or deletes the adaptive one, as the note at its top says.

Instructors: publish this instead of the adaptive version if you prefer, and unpublish or delete the adaptive one.

Assignment 8 of the term — compute what one more worker and one more chair add, compare a marginal cost with an average cost, count an owner's implicit costs, and explain to someone outside economics why a profit on the books can still leave an owner behind.

This week you learned to read a firm's production schedule and cost table: marginal and average product, the law of diminishing marginal returns, fixed, variable, total, average, and marginal cost, and the difference between accounting and economic profit. In Week 1 you learned that the opportunity cost of a choice is the value of the best alternative you give up, and this week that idea returns as the implicit cost of an owner's time and money. In this assignment you work four short problems, interpret each one, and explain a claim to someone who has never studied economics. This week's lecture tutorial, quiz, discussion, and Model Workshop practice the same ideas from other angles.

The task

You will use these materials, all illustrative numbers built for this course (not real data) and all from this week's chapter:

  • The bakery (Dataset K): with 0 to 6 workers in one fixed kitchen, it makes 0, 10, 25, 45, 60, 70, and 75 loaves a day.
  • The chair workshop (Dataset L): fixed cost is 60 dollars a day, and total cost is 60, 90, 110, 126, 148, 180, and 228 dollars a day for 0 to 6 chairs.
  • The phone-repair stand: revenue of 80,000 dollars a year, explicit costs of 50,000 dollars, and an owner who left a job paying 36,000 dollars a year and gave up 1,000 dollars a year of interest on the savings she put into tools.

Work these four problems, showing your arithmetic:

  1. In the course's illustrative bakery, 3 workers in the fixed kitchen make 45 loaves a day and 4 workers make 60 loaves a day. What is the marginal product of the 4th worker, in loaves a day?
  2. In the course's illustrative chair workshop, total cost is 148 dollars a day at 4 chairs and 180 dollars a day at 5 chairs. What is the marginal cost of the 5th chair, in dollars?
  3. In the same illustrative chair workshop, total cost is 180 dollars a day at 5 chairs. What is the average total cost at 5 chairs, in dollars per chair?
  4. The course's illustrative phone-repair stand brings in 80,000 dollars a year and pays 50,000 dollars in explicit costs; its owner gave up a 36,000-dollar salary and 1,000 dollars of interest to run it. What is its economic profit, in dollars a year?

Beside each answer, add one brief interpretation. For problem 1, say in words what the marginal product means for the bakery and why the 4th worker adds less than the 3rd, using the law of diminishing marginal returns. For problem 2, say what the marginal cost means for the workshop and why the 60 dollars of fixed cost does not appear in it. For problem 3, say what the average total cost means, and use your answer to problem 2 to explain why average total cost falls when the 5th chair is made. For problem 4, say what the economic profit means for the owner and how it differs from the stand's accounting profit.

Explain it to a non-expert

A friend who runs a weekend food truck has never studied economics. The friend says: "My books show a profit every month, so the truck must be paying me better than my old job did." Write a 3–5 sentence message to your friend that explains in everyday words the difference between a profit on the books and an economic profit, says which costs the books leave out, and names one limit, such as that the numbers cannot measure what the friend enjoys about being their own boss. Explain any technical term in everyday words. More than one accurate wording can be defensible, and the message does not need to decide whether your friend should keep the truck.

For a different, ungraded example, imagine a jam maker who says: "My jars cost me 4 dollars each on average, so the next jar I make will cost me 4 dollars too." Model answer: "The 4 dollars is the whole month's cost shared out over every jar, including the rent on the kitchen that you pay no matter how many jars you make. The next jar adds only the fruit, sugar, and time it takes, which could be more or less than 4 dollars. When the kitchen gets busy, an extra jar can cost more than the average, because you are working around everything else. One limit: we only know your average, so we would need your costs at two different output levels to find what the next jar really adds."

Use that pattern for your message to your friend, with your own explanation and evidence.

Show your arithmetic. A reader should be able to reproduce every number you report from the values above without guessing which values or steps you used.

Deliverables

Submit a single cost report containing:

  • the four answers, each with the arithmetic shown and a brief interpretation as the task describes;
  • your message to your friend, explaining the difference between a profit on the books and an economic profit, naming the costs the books leave out, and naming one limit; and
  • a one-line restatement of the values you used, so your results are reproducible.

Keep it to roughly one page. Clear and correct beats long.

Choose how you show it. Present your report as written text, or as a recorded audio or video explanation of about three minutes with a transcript, or as a labelled sketch that describes the marginal-cost and average-total-cost curves in words with a short note. Every form is graded by the same scoring criteria. Submit in any accessible file type or as a link; a recorded response may be submitted as audio or video with a transcript, or as text.

How you'll be graded

The full analytic rubric is attached to this assignment in Canvas.

Academic integrity and AI use

This version is designed to be completed without AI: do the computations, the interpretations, and the writing yourself, without any AI tool. You may use a calculator or a spreadsheet for the arithmetic. Submitting AI-generated work as your own, or copying another student's work, is an integrity violation under the course policy.

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