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Let's suppose that the current state of a firm's production technology is represented by the following...
1. There is a furniture manufacturer using labor (L) and capital (K) to produce tables. Its production function is given by q= 10L^.75 K^.40. It pays a wage of $5 per hour and rents capital at a rate...
1. There is a furniture manufacturer using labor (L) and capital
(K) to produce tables. Its production function is given by q=
10L^.75 K^.40. It pays a
wage of $5 per hour and rents capital at a rate of $15. The firm
wants to find the cost-minimizing bundle of inputs to produce
10,000 tables. Assume K is on the y-axis in what
follows.
Write out the firm’s cost function.
Calculate the firm’s isocost equation.
What is the slope of the...
(1) Let's suppose that a firm's production technology is represented by the following production function. What...
(1) Let's suppose that a firm's production technology is represented by the following production function. What is the marginal product of labor (MPL)? a. -3 b. 1 c. 3 d. 1/3 What is the marginal product of capital (MPK)? a. -1 b. 1/3 c. 3 d. 1 What is the marginal rate of technical substitution (MRTS)? a. 1/3 b.3 c. -1/3 d. 1
Let's suppose that a firm's production technology is represented by the following production function q =...
Let's suppose that a firm's production technology is represented by the following production function q = F( K, L) = min { 2K, L } What is the MRTS when 2K > L a. Infinite b. 0 c. 1/2 d. 2 What is the MRTS when a. 0 b. 1/3 c. infinite d. 2
Practice Questions: Firm Cost Minimization The production function of computers takes the following form: Q= K02L...
Practice Questions: Firm Cost Minimization The production function of computers takes the following form: Q= K02L 1. Based on the production function, find MRTS LK a. b. Mathematically show that MRTS,K diminishes as the firm uses more labor. Suppose currently the company uses 3 units of K, and 2 units of L What is MRTS? What does the number tell you? c. Suppose the wage rate W= $8/hour and the rental rate of capital R $4/hour. Write an equation for...
QUESTION 10 Acme Eggs produces eggs. Acme has estimated this production function for its eggs: Q...
QUESTION 10 Acme Eggs produces eggs. Acme has estimated this production function for its eggs: Q = 10L".SK.) The marginal product of labor is given by MPL =5L-0.5 K.S and the marginal product of capital is given by MPx=520.5 -0.5 where Q = output measured in eggs, L = labor measured in person hours, and K = capital measured in machine hours. Acme currently pays a wage of $15 per hour and considers the relevant rental price for capital to...
4. Consider a firm that uses both labor and capital in production. The price of capital...
4. Consider a firm that uses both labor and capital in production. The price of capital is $20 per unit and the wage rate is $10 per hour Draw the firm's isocost line assuming a total production cost of $100. How steep is this line (that is, what is its slope)? Be sure to clearly label the axes. (3 points) Suppose the wage drops to $5 per unit. In which direction does the substitution effect change the firm's demand for...
4. Consider a firm that uses both labor and capital in production. The price of capital...
4. Consider a firm that uses both labor and capital in production. The price of capital is $20 per unit and the wage rate is S10 per hour. a. Draw the firm's isocost line assuming a total production cost of $100. How steep is this line (that is, what is its slope)? Be sure to clearly label the axes. (3 points) b. Suppose the wage drops to $5 per unit. In which direction does the substitution effect change the firm's...
Suppose a firm produces an output level according to the simple production function: Q = 5...
Suppose a firm produces an output level according to the simple production function: Q = 5 L K, which implies M P L = 5 K and M P K = 5 L. Further suppose a firm must pay labor (L) a wage rate (w) of $5 per unit, and the rental rate (r) on capital (K) is $25 per unit. A. Find the marginal rate of technical substitution. B. Write the equation for the isocost line. What is the...
For Question 1-4, use the following information: A firm's production function is gives as: q=3K0.6 L0.4 and its cost...
For Question 1-4, use the following information: A firm's production function is gives as: q=3K0.6 L0.4 and its cost minimizing choice of inputs is L=250 and K=400 1. What is the value of MRTS at the firm's cost minimizing choice of input? 2. If the wage that the firm's pay to hire one unit of labor is 10, what is the user cost of capital? (Graph questions) <--- (Really important - please give clear steps and explanation) 3. Write down...
6) Davy Metal Company produces brass fittings. Davy's engineers estimate the production function represented below as...
6) Davy Metal Company produces brass fittings. Davy's engineers estimate the production function represented below as relevant for their long-run capital-labor decisions. Q = 500L0.6 0.8 where Q- annual output measured in pounds, L-labor measured in person hours, K=capital measured in machine hours. Davy's employees are relatively highly skilled and earn $15 per hour. The firm estimates a rental charge of $50 per hour on capital. Davy forecasts annual costs of $500,000 per year, measured in real dollars. a. Write...
1. There is a furniture manufacturer using labor (L) and capital
(K) to produce tables. Its production function is given by q=
10L^.75 K^.40. It pays a
wage of $5 per hour and rents capital at a rate of $15. The firm
wants to find the cost-minimizing bundle of inputs to produce
10,000 tables. Assume K is on the y-axis in what
follows.
Write out the firm’s cost function.
Calculate the firm’s isocost equation.
What is the slope of the...
Practice Questions: Firm Cost Minimization The production function of computers takes the following form: Q= K02L 1. Based on the production function, find MRTS LK a. b. Mathematically show that MRTS,K diminishes as the firm uses more labor. Suppose currently the company uses 3 units of K, and 2 units of L What is MRTS? What does the number tell you? c. Suppose the wage rate W= $8/hour and the rental rate of capital R $4/hour. Write an equation for...
QUESTION 10 Acme Eggs produces eggs. Acme has estimated this production function for its eggs: Q = 10L".SK.) The marginal product of labor is given by MPL =5L-0.5 K.S and the marginal product of capital is given by MPx=520.5 -0.5 where Q = output measured in eggs, L = labor measured in person hours, and K = capital measured in machine hours. Acme currently pays a wage of $15 per hour and considers the relevant rental price for capital to...
4. Consider a firm that uses both labor and capital in production. The price of capital is $20 per unit and the wage rate is $10 per hour Draw the firm's isocost line assuming a total production cost of $100. How steep is this line (that is, what is its slope)? Be sure to clearly label the axes. (3 points) Suppose the wage drops to $5 per unit. In which direction does the substitution effect change the firm's demand for...
4. Consider a firm that uses both labor and capital in production. The price of capital is $20 per unit and the wage rate is S10 per hour. a. Draw the firm's isocost line assuming a total production cost of $100. How steep is this line (that is, what is its slope)? Be sure to clearly label the axes. (3 points) b. Suppose the wage drops to $5 per unit. In which direction does the substitution effect change the firm's...
6) Davy Metal Company produces brass fittings. Davy's engineers estimate the production function represented below as relevant for their long-run capital-labor decisions. Q = 500L0.6 0.8 where Q- annual output measured in pounds, L-labor measured in person hours, K=capital measured in machine hours. Davy's employees are relatively highly skilled and earn $15 per hour. The firm estimates a rental charge of $50 per hour on capital. Davy forecasts annual costs of $500,000 per year, measured in real dollars. a. Write...
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