Homework Answers
Marginal Rate of Techinical substitution refers to the rate at which one factor of production can be substituted by another factor of production while maintaing the same level of output.
MRTS between input bundles A and B = Change in Land while going from bundle A to B ÷ Change in Labor while going from bundle A to B
MRTS= -2 ÷ 4 = -0.5
Absolute Value of MRTS= 0.5
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A firm uses land and labor to produce flowers. The isoquant graph to the right illustrates...
A firm uses land and labor to produce flowers. Suppose the cost of renting land is...
A firm uses land and labor to produce flowers. Suppose the cost of renting land is $60,000 per acre per season and the cost of each worker is $15,000 in wages per season. The firm has $240,000 to spend on production. Use the line drawing tool to draw the firm's isocost line. Label this line 'Isocost line'. Carefully follow the instructions above, and only draw the required objects. Land (acres per season) P2468 10 12 14 16 18 20 Labor...
TUTORIAL2 Chapter 7 Part 1 Key Concepts and Equations: Production Isoquant: shows all combinations of input...
TUTORIAL2 Chapter 7 Part 1 Key Concepts and Equations: Production Isoquant: shows all combinations of input quantities that yield the same level of output. Higher isoquant: higher level of output Marginal Rate of Technical Substitution: MRTS is the slope of the isoquant at any input combination. It tells us the rate at which we must increase the qty of input 2 per unit decrease in qty of input 1. MRTS diminishes as we move down the isoquant from left to...
TUTORIAL2 Chapter 7 Part 1 Key Concepts and Equations: Production Isoquant: shows all combinations of input...
TUTORIAL2 Chapter 7 Part 1 Key Concepts and Equations: Production Isoquant: shows all combinations of input quantities that yield the same level of output. Higher isoquant: higher level of output Marginal Rate of Technical Substitution: MRTS is the slope of the isoquant at any input combination. It tells us the rate at which we must increase the qty of input 2 per unit decrease in qty of input 1. MRTS diminishes as we move down the isoquant from left to...
The following graph shows the isoquant representing the combinations of capital and labor needed to produce...
The following graph shows the isoquant representing the combinations of capital and labor needed to produce 10 left-handed can openers. Assume that diminishing marginal returns characterize the production function. (Hint: click a point on the graph to see its coordinates.) 500 450 400 360 300 LABOR (Workers) 260 + 200 160 + * 100 50 o 12 3 18 15 o 21 Using the information provided on the graph, complete the following table with the changes in capital and labor...
TUTORIAL2 Chapter 7 Part 1 Key Concepts and Equations: Production Isoquant: shows all combinations of input...
TUTORIAL2 Chapter 7 Part 1 Key Concepts and Equations: Production Isoquant: shows all combinations of input quantities that yield the same level of output. Higher isoquant: higher level of output Marginal Rate of Technical Substitution: MRTS is the slope of the isoquant at any input combination. It tells us the rate at which we must increase the qty of input 2 per unit decrease in qty of input 1. MRTS diminishes as we move down the isoquant from left to...
Write a definition and draw a graph for the isoquant, assuming that the two factors of...
Write a definition and draw a graph for the isoquant, assuming that the two factors of production are capital (K) and labor (L). Explain the law of diminishing marginal returns and if it applies or not applies to a production function of the form Q = a + bL + cK. Assume that price of labor is w = 10, and the cost of capital is r = 20. Assume that the company Impaling Poles ‘r Us has the following...
#4 4. Apples are harvested by hand. Two workers and of apples per day. There is...
#4
4. Apples are harvested by hand. Two workers and of apples per day. There is NO substitution between worker workers and one ladder are required to pick 100 pounds in Between workers and ladders. Graph the isoquants for 200, 400 and 600 pounds of apples per a . What is the marginal rate of technical substitution between labor tween labor and capital? -2 4 6 8 10 12 14 16 18 20 - 5. What is the difference between...
A firm uses two inputs x1 and x2 to produce output y. The production function is...
A firm uses two inputs x1 and x2 to produce
output y. The production function is given by f(x1, x2) = p
min{2x1, x2}. The price of input 1 is 1 and the price of input 2 is
2. The price of output is 10.
4. A firm uses two inputs 21 and 22 to produce output y. The production function is given by f(x1, x2) = V min{2x1, x2}. The price of input 1 is 1 and the price...
#3 3. The isoquant map for a firm that produces output with labor and capital is shown on the next page. The price...
#3
3. The isoquant map for a firm that produces output with labor and capital is shown on the next page. The price of labor is $20 per unit and the price of capital is $60 per unit. a) Draw the isocost lines for expenditures of TC =$300 and TC -$360. b) How many units of labor and how many units of capital should the firm hire to minimize the cost of producing Q. units of output? EXPLAIN. c) What...
A farmer uses three inputs to produce vegetables: land, labor, and capital
A farmer uses three inputs to produce vegetables: land, labor, and capital. The production function for the farm exhibits diminishing marginal rate of technical substitution. a. In the short run the amount of land is fixed. Suppose the prices of capital and labor both increase by 5%. What happens to the cost-minimizing quantities of labor and capital for a given level of output? (Remember that there are three inputs, one of which is fixed). b. Suppose only the cost of labor goes...
A firm uses land and labor to produce flowers. Suppose the cost of renting land is $60,000 per acre per season and the cost of each worker is $15,000 in wages per season. The firm has $240,000 to spend on production. Use the line drawing tool to draw the firm's isocost line. Label this line 'Isocost line'. Carefully follow the instructions above, and only draw the required objects. Land (acres per season) P2468 10 12 14 16 18 20 Labor...
TUTORIAL2 Chapter 7 Part 1 Key Concepts and Equations: Production Isoquant: shows all combinations of input quantities that yield the same level of output. Higher isoquant: higher level of output Marginal Rate of Technical Substitution: MRTS is the slope of the isoquant at any input combination. It tells us the rate at which we must increase the qty of input 2 per unit decrease in qty of input 1. MRTS diminishes as we move down the isoquant from left to...
TUTORIAL2 Chapter 7 Part 1 Key Concepts and Equations: Production Isoquant: shows all combinations of input quantities that yield the same level of output. Higher isoquant: higher level of output Marginal Rate of Technical Substitution: MRTS is the slope of the isoquant at any input combination. It tells us the rate at which we must increase the qty of input 2 per unit decrease in qty of input 1. MRTS diminishes as we move down the isoquant from left to...
The following graph shows the isoquant representing the combinations of capital and labor needed to produce 10 left-handed can openers. Assume that diminishing marginal returns characterize the production function. (Hint: click a point on the graph to see its coordinates.) 500 450 400 360 300 LABOR (Workers) 260 + 200 160 + * 100 50 o 12 3 18 15 o 21 Using the information provided on the graph, complete the following table with the changes in capital and labor...
TUTORIAL2 Chapter 7 Part 1 Key Concepts and Equations: Production Isoquant: shows all combinations of input quantities that yield the same level of output. Higher isoquant: higher level of output Marginal Rate of Technical Substitution: MRTS is the slope of the isoquant at any input combination. It tells us the rate at which we must increase the qty of input 2 per unit decrease in qty of input 1. MRTS diminishes as we move down the isoquant from left to...
#4
4. Apples are harvested by hand. Two workers and of apples per day. There is NO substitution between worker workers and one ladder are required to pick 100 pounds in Between workers and ladders. Graph the isoquants for 200, 400 and 600 pounds of apples per a . What is the marginal rate of technical substitution between labor tween labor and capital? -2 4 6 8 10 12 14 16 18 20 - 5. What is the difference between...
A firm uses two inputs x1 and x2 to produce
output y. The production function is given by f(x1, x2) = p
min{2x1, x2}. The price of input 1 is 1 and the price of input 2 is
2. The price of output is 10.
4. A firm uses two inputs 21 and 22 to produce output y. The production function is given by f(x1, x2) = V min{2x1, x2}. The price of input 1 is 1 and the price...
#3
3. The isoquant map for a firm that produces output with labor and capital is shown on the next page. The price of labor is $20 per unit and the price of capital is $60 per unit. a) Draw the isocost lines for expenditures of TC =$300 and TC -$360. b) How many units of labor and how many units of capital should the firm hire to minimize the cost of producing Q. units of output? EXPLAIN. c) What...
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