Question

Given: Assume a firm is attempting to minimize cost by selecting units of capital and units of labor in order to produce an o

Using the table, how did the new event affect the firms use of labor? O It caused quantity demanded for labor to increase. O

UJsin h: tablk, Iw did the eni affci the: is use of capial? O It caused quantity demanded for labor to increase. O It caused

Using the table, how did the new event affect the firms total cost? Total cost increased Total cost remained unchanged O Can

Using the table, how did the firm economically respond to the new event? O The firm employed fewer units of capital and fewer

Assume a firm is attempting to minimize cost by selecting units of capital and units of labor in order to produce an output level at least as large as some specified output quota. Cost-minimizing choices are provided in the following table for a baseline scenario and new scenario.


Using the table, how did the new event affect the firm's use of labor?

It caused quantity demanded for labor to increase.

Cannot be determined.

It caused no change in quantity demanded for labor.

It caused conditional demand for labor to decrease.

It caused conditional demand for labor to increase.

It caused no change in conditional demand for labor.

It caused quantity demanded for labor to decrease.


Using the table, how did the new event affect the firm's use of capital?

It caused quantity demanded for labor to increase.

It caused no change in conditional demand for capital.

It caused no change in quantity demanded for capital.

It caused conditional demand for capital to decrease.

It caused quantity demanded for capital to decrease.

Cannot be determined.

It caused conditional demand for capital to increase.


Using the table, how did the new event affect the firm's total cost?

Total cost increased.

Total cost remained unchanged.

Cannot be determined.

Total cost decreased.


Using the table, how did the firm economically respond to the new event?

The firm employed fewer units of capital and fewer units of labor, which decreased total cost, in order to reach a lower output quota.

The firm employed fewer units of capital and more units of labor, which decreased total cost, in order to reach a lower output quota.

The firm employed more units of capital and fewer units of labor, which decreased total cost, in order to reach a lower output quota.

The firm employed more units of capital and more units of labor, which decreased total cost, in order to reach a lower output quota.


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Answer #1

a) It caused conditional demand for labor to decrease.

The firm earlier had 910 units of labor employed which after the event were reduced to 888.
It indicates that the firm's demand for labor has decreased. The conditional demand is considered a function of factors of production for the specified output level.

b) It caused conditional demand for capital to decrease.

The firm has a specified level of output and for the sake of cost-cutting, it altered the use of factors of production which is labor and capital. According to the table, the units of capital employed has been decreased.

c) The total cost decreased.

Although, the firm has the same rate of wage and rental but it employed fewer units of labor and capital which have decreased the total cost.

d) The firm employed fewer units of labor and fewer units of capital which decreased total cost, in order to reach a lower output quota.

The firm has lowered its output marginally and it had the same rate of labor wage as well as capital rent. However, it employed fewer units of capital and labor to achieve that level of output which decreased the total cost.

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