If the cost of production is $2000, the rent of capital is r=$40, and the wage...
If the cost of production is $2000, the rent of capital is r=$40, and the wage of labor is w=$50, draw the isocost line.
If the cost of production increases fo $5,000, redraw the isocost line.
Start from the initial situation. Now, if the rent of capital declines to $20, redraw the isocost line.
Start from the initial situation. Now, if the wage of labor increases to $100, redraw the isocost line.
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If the cost of production is $2000, the rent of capital is
r=$40, and the wage...
15 09. 00 points) Suppose that a firm's cost per unit of labor (w) is $30 per day and its cost per a. Draw the isocost line for a total cost per day of s15,000. (Base case) and Draw the What...
15 09. 00 points) Suppose that a firm's cost per unit of labor (w) is $30 per day and its cost per a. Draw the isocost line for a total cost per day of s15,000. (Base case) and Draw the What are the maximum amount of K and L possibly used to produce 100 units? unit of capital (r) is $50 per day isoquant curve when this firm is producing efficiently, assuming output is 100 units b. If the price...
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...
2. Assume a firm can produce according to the production function: ? = ?(?, ?) =...
2. Assume a firm can produce according to the production function: ? = ?(?, ?) = ? + 3? Assume the wage, the cost of labor, is 6, and rent the cost of capital, is 12. What is the best combination of labor and capital to produce 12 units with? Illustrate your answer to part a with an isoquant/isocost drawing. If the wage decreased to $2, would this change how the firm will produce? If so, how? 3. Assume a...
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...
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...
A firm has a Cobb-Douglas production function q = AKL, where K denotes capital, L is...
A firm has a Cobb-Douglas production function q = AKL, where K denotes capital, L is labor, and A, a, b, are constants. ginal returns to labor in the short run if its production function is 1. Sketch an isoquant line, write a mathematical formula for its slope, and provide an interpretation for its meaning. 2. On a separate graph, draw an isocost line, write a mathematical formula for its slope, and provide an interpretation for its meaning. 3. On...
2. Suppose that the price of labor is $20 (w = $20) and the price of capital is $40 (r = $40). A firm is able to pa...
2. Suppose that the price of labor is $20 (w = $20) and the price of capital is $40 (r = $40). A firm is able to pay the total cost of $200 to employ labor (L) and capital (K). The firm's production function is given as Q = LK, where Q is units of output, L is units of labor, and K is units of capital. (a) Construct the firm's isocost function and graph it on a two-dimensional plane....
TRUE OR FALSE: As a result of the increase in wage, the firms supply curve will...
TRUE OR FALSE: As a result of the increase in wage, the firms
supply curve will only change if its subsituties towards capital at
each level of output.
6. Substitution effect due to a relative change in input price Аа аа Suppose a firm is initially producing 100 units of output at point B, where the purple line (diamond symbols) labeled Isocosti lies tangent to isoquant IQ (Q = 100). Suppose that initially the wage is $10 and the rental...
S) Assume the rental rate of capital is 2 and the wage rate is 3. a. Draw an isocost curve for a total cost level of...
S) Assume the rental rate of capital is 2 and the wage rate is 3. a. Draw an isocost curve for a total cost level of 120. b. If the marginal product of labor is 6, what is the marginal product of capital at an economically efficient point? Why? What are two formulas for the slope of the isocost you drew in part a? c.
15 09. 00 points) Suppose that a firm's cost per unit of labor (w) is $30 per day and its cost per a. Draw the isocost line for a total cost per day of s15,000. (Base case) and Draw the What are the maximum amount of K and L possibly used to produce 100 units? unit of capital (r) is $50 per day isoquant curve when this firm is producing efficiently, assuming output is 100 units b. If the price...
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...
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...
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...
A firm has a Cobb-Douglas production function q = AKL, where K denotes capital, L is labor, and A, a, b, are constants. ginal returns to labor in the short run if its production function is 1. Sketch an isoquant line, write a mathematical formula for its slope, and provide an interpretation for its meaning. 2. On a separate graph, draw an isocost line, write a mathematical formula for its slope, and provide an interpretation for its meaning. 3. On...
2. Suppose that the price of labor is $20 (w = $20) and the price of capital is $40 (r = $40). A firm is able to pay the total cost of $200 to employ labor (L) and capital (K). The firm's production function is given as Q = LK, where Q is units of output, L is units of labor, and K is units of capital. (a) Construct the firm's isocost function and graph it on a two-dimensional plane....
TRUE OR FALSE: As a result of the increase in wage, the firms
supply curve will only change if its subsituties towards capital at
each level of output.
6. Substitution effect due to a relative change in input price Аа аа Suppose a firm is initially producing 100 units of output at point B, where the purple line (diamond symbols) labeled Isocosti lies tangent to isoquant IQ (Q = 100). Suppose that initially the wage is $10 and the rental...
S) Assume the rental rate of capital is 2 and the wage rate is 3. a. Draw an isocost curve for a total cost level of 120. b. If the marginal product of labor is 6, what is the marginal product of capital at an economically efficient point? Why? What are two formulas for the slope of the isocost you drew in part a? c.
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