You are the owner of a small bread factory and are thinking of lowering costs and expanding. Your small-business advisors suggested that you first review your operations and make some technological changes. Complete the following:

·         Explain what a technological change is and how you can use it to lower your costs.

·         Fill in the table below showing the explicit fixed costs of the bread factory and the total amount of the costs.

·         Because you are not an expert yet on analyzing costs and optimal production levels, you decide to do a very simple analysis of your short-run fixed and variable costs if you expand. You decide that your only fixed cost will be the ovens and the variable costs will be the workers.

 Quantity of Workers Quantity of Ovens Quantity of Loaves of Bread Produced Cost of Ovens Cost of Workers Per  Week Total Cost 0 2 0 500 0 500 1 2 50 450 2 2 125 3 2 210 4 2 300 5 2 410 6 2 550 7 2 625 8 2 660 9 2 700 10 2 730

Instructions

1.     Calculate the  total cost and the average total cost, and add it to the table

2.     Calculate the marginal product of labor, and add it to the table.

3.     Calculate the average product of labor, and add it to the table.

4.     Although there seems to be a great demand for your bread, why would productivity decline when you hire more labor in the short run?

5.     What are your marginal costs?

6.     At what point do your marginal costs and your total costs intersect?