(a)

(i)The following table shows the hourly production schedule at Yuen Stickers, Inc., a poster manufacturer. Plant and machinery costs are $100, and the hourly wage per worker is $15. Fill in the blanks to complete the table, rounding your answers to 2 decimal places.(13 marks)

Number of Workers

Output

Total variable cost

(TVC)

Total fixed cost (TFC)

Total cost

(TC)

Average fixed cost (AFC)

Average variable cost (AVC)

Average Total Cost (ATC)

Marginal cost (MC)

0

0

-

-

-

-

-

1

60

2

150

3

260

4

380

5

490

6

570

7

610

8

630

9

635

(ii)Describe the relationship between ATC and MC as indicated in the above table. [Hint: The relationship between ATC and MC refers to whether MC is below or above ATC to the left or right of the minimum point of the ATC curve]. (2 marks)

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(b)Use your knowledge learned in AF3625 Engineering Economics to answer the following questions. State the relevant concepts.

(i)A local club in District A charges a fixed monthly membership fee of $48. Members are allowed to borrow as many videos as they would like to under this membership plan. Suppose an average member borrows 8 videos per month. Now the local club decides to waive the monthly membership fee but charges $6 for borrowing each video. Discuss the effect of the new policy on the total number of videos lent out from the local club each month. Provide brief explanation to your answer. (4 marks)

Relevant economic concept(s):

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Brief explanation:

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(ii)"Without any government regulation, a single-price monopolist will always charge its consumers the highest affordable price they are willing to pay." Justify whether the statement is true or false. Explain your answer. (3 marks)

Relevant economic concept(s):

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Brief explanation:

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(iii) One of your classmates is reading the self-study notes for preparing for AF3625 examination and she makes the following statement: "Instead of reading the self-study notes for two hours, I could have gone shopping or watched a TV program. Therefore, the opportunity cost of reading the self-study notes is the shopping and the TV program that I have to give up."Justify whether the statement made by your classmate is correct or not. Explain your answer. (3 marks)

Relevant economic concept(s):

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Brief explanation:

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