Microeconomics 6th Edition by Robert Hall, Shirley Kuiper, Marc Lieberman

Exercise 5

Clean 'n' Shine is a competitor to Spotless Car Wash. Like Spotless,it must pay $150 per day for each automated line it uses. But Clean 'n' Shine has been able to tap into a lower-cost pool of labor,paying its workers only $100 per day. Clean 'n' Shine's production technology is given in the following table. To determine its short-run cost structure,fill in the blanks in the table.
a. Over what range of output does Clean 'n' Shine experience increasing marginal returns to labor? Over what range does it experience diminishing marginal returns to labor?
b. As output increases,do average fixed costs behave as described in the text? Explain.
c. As output increases,do marginal cost,average variable cost,and average total cost behave as described in the text? Explain.
d. Looking at the numbers in the table,but without drawing any curves,is the relationship between MC and AVC as described in the text? What about the relationship between MC and ATC ?
Short-Run Costs for Clean 'n' Shine Car Wash