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ES2555 PROJECT PART 1 (ITT TECH)Download ES2555 Survey of EconomicsPROJECT PART 1: APPLICATIONS OF MICROECONOMICS AND MACROECONOMICSTitle: Production DecisionsSuppose you are in charge of a firm that produces skateboards. The companys fixed inputs include the building and equipment, and the variable inputs are the raw materials and workers. You need to determine the best number of employees to use during each shift. Focus on the relationship between the number of workers employed on the assembly line and the number of skateboards produced per shift.Output varies with the number of workers employed as shown in the table below. Complete the table by calculating the average product (AP) for each level of labor and the marginal product (MP) of each additional worker.To calculate the average product, divide the output number by the labor number. For example, with two workers, we have an output of 8. Eight divided by two equals four (8/2 = 4); thus, the average output is 4.Marginal product is equal to output minus the output for the prior number of laborers. To calculate the marginal product, subtract the output for the previous number of workers from the output for the current number of workers. For example, with two workers and an output of 8, we have a marginal product of 5 because 8 (the output for 2 workers) minus 3 (the output for 1 worker which is the previous number of workers employed) equals 5.Is this production function consistent with the law of diminishing marginal returns? Explain.Fill in the blank:This production function shows that diminishing marginal product (or diminishing returns) sets in when the4thworker is added.You will now determine the optimal, or profit-maximizing, level of output for a skateboard-manufacturing firm. Your firms fixed cost is equal to $76 per day. Remember that fixed costs are the same at all levels of output. Variable costs depend on how many units of labor you decide to employ. The daily payroll cost is $64 per worker. Multiply this cost per worker by labor to calculate variable cost. Add fixed cost and variable cost tofind total cost.Calculate marginal costby dividing the change in total cost by the change in output. Complete the missing values in the table.Remember that output should always be increased as long as marginal product is rising or marginal cost is falling. Once marginal cost begins to rise, reflecting the law of diminishing returns, output should be increased only if marginal revenue exceeds marginal cost.Marginal revenue is equal to product price if this firm is in a perfectly competitive market.Assume the marginal revenue and price is both equal to $25.Answer the following questions:1. Should output be increased from 15 to 20? That is, should the fourth worker be hired? Use the marginal approach to explain why or why not.2. Should output be increased from 20 to 22? That is, should the fifth worker be hired? Use the marginal approach to explain why or why not.3. Calculate profit assuming output is 15. Show all the calculation steps.4. Calculate profit assuming output is 20. Show all the calculation steps.5. Calculate profit assuming output is 22. Show all the calculation steps.6. Assuming the firms goal is to maximize profit, how many workers should you employ and how much output should be produced each day?