Labor |
Output |
MP |
MRP |
MRC |
0 |
0 |
*** |
*** |
*** |
1 |
22 |
|||
2 |
38 |
|||
3 |
52 |
|||
4 |
62 |
|||
5 |
70 |
2. Explain the rule for determining the optimal use of a multiple resources when minimizing costs, then determine the least cost manner of producing 138 units of output given that the price of labor is $4 and the price of capital is $8
Labor |
MPL |
MPL /PL |
Capital |
MPK |
MPK /PK |
1 |
24 |
1 |
40 |
||
2 |
16 |
2 |
30 |
||
3 |
12 |
3 |
28 |
||
4 |
8 |
4 |
10 |
||
5 |
4 |
5 |
5 |
3.If the price of output sells for $0.80 each, determine the profit maximizing quantities of labor and capital that should be used, assuming the price of labor is $4 and the price of capital is $8. If labor and capital are the only inputs, compute the profit of this firm.
Labor |
MPL |
MRPL |
MRPL/PL |
Capital |
MPK |
MRPK |
MRPK/PK |
1 |
24 |
1 |
40 |
||||
2 |
16 |
2 |
30 |
||||
3 |
12 |
3 |
28 |
||||
4 |
8 |
4 |
10 |
||||
5 |
4 |
5 |
5 |
Question 1
In case of single resource or input, the optimal amount of resource or input is that amount corresponding to which marginal revenue product of input or resource equals the marginal resource cost of input or resource.
If there is no explicit amount corresponding to which marginal revenue product equals the marginal resource cost the firm will employ the amount of input or resource upto which marginal revenue product exceeds the marginal resource cost.
Marginal revenue product is calculated as follows -
MRP = MP * Price of output
Marginal resource cost is calculated as follows -
MRC = Price of resource
Following is the complete table -
Labor | Output | MP | MRP | MRC |
0 | 0 | - | - | - |
1 | 22 | 22 | 44 | 26 |
2 | 38 | 16 | 32 | 26 |
3 | 52 | 14 | 28 | 26 |
4 | 62 | 10 | 20 | 26 |
5 | 70 | 8 | 16 | 26 |
The above table shows that the marginal revenue product exceeds the marginal resource cost up to employment of 3 workers.
So,
The optimal amount of labor is 3 workers.
Explain the rule for determining the optimal resource use for a single resource or input and...
Explain the rule for determining the optimal resource use for a single resource or input and determine the optimal amount of labor, given that each output sells at $2 and labor is $26 per unit. Labor Output MP MRP MRC 0 0 *** *** *** 1 22 2 38 3 52 4 62 5 70 2. Explain the rule for determining the optimal use of a multiple resources when minimizing costs, then determine the least cost manner of producing 138...
1. If the price of output sells for $0.80 each, determine the profit maximizing quantities of labor and capital that should be used, assuming the price of labor is $4 and the price of capital is $8. If labor and capital are the only inputs, compute the profit of this firm. LaborMPL MRPLMRPL/PLCapitalMPK MRPKMRPK/PK124 140216 230312 32848 41054 55
PK $4.00 Po-$2.00 PL-$2.00 Assume: K MPK MP/PK MRP/PK MRP/PL L MPL MP/PL 1 28 7 14 15 1 5 10 246 2 12 2 12 8 4 3 20 5 10 3 3 6. 4 12 8 4 6 2 2 4 5 1 2 6 4 1 2 6 1 0.5 1 0.5 0.23 7 2 0.5 7 8 0.25 0.13 0.25 0.5 8 0.26 Q.125 0.06 0.12 9 0.5 0.125 0.25 This firm will earn profit $499...
QUESTION 5 The marginal product for labor is given (MP) = 3 – 0.02*L; price of the product is $100 and wage = 200. Based on information above, the marginal product of labor at the optimal level of employment is $3 $2 $1.5 $1 2 points QUESTION 6 If the labor elasticity of output is 0.5 and the capital elasticity of output is 0.9, then the production function exhibits constant returns to scale. economies of scale. diseconomies of scale. diminishing...
Complete the following labor supply table for a firm hiring labor competitively 9 Marginal Marginal Resource Units of Total Labor Revenue Labor (Labor) Cost Wage Rate Cost Product $14 $ na na 1 14 $38 2 14 28 14 24 4 14 20 5 14 14 6 14 1e Show graphically the labor supply and marginal resource (labor) cost curves for this Instructions: 1. Use the line tool (MRC, plot 6 points) to draw the marginal resource cost curve. 2...
Pk $4.00 PL = $2.00 Assume:P $2.00 10 1 15 5 1 28 2 24 6 12 3 20 5 10 4 12 48 7 1 8 2 12 4 4 6 10.5 0.5 0.250.5 7 2 0.5 8 1 0.25 0.5 9 0.5 0.125 0.25 The least cost combination of capital and labor to produce 87 units of output. 0.25 0.13 0.26 8 0.12 90.125 0.06
Pk $4.00 PL = $2.00 Assume:P $2.00 10 1 15 5 1 28...
The production function of the Auto parts firm is given by Q-5L-L, where Q is the units of output and L is the number of labor hours. Each output sells for 100 dollars per unit. The human resources manager estimates that the marginal cost of hiring an extra worker is 50 dollars. How many labor hours should this firm hire? Hint: MPL=5-2 L 1) 2) A frim's production function is given by Q(L)-6L, where Q measures output and L is...
In positive economic models of the labor market, it is assumed that workers maximize utility (happiness). firms maximize profits. resources are scarce. all of these are true. 2 points QUESTION 13 Because of the principle of __________, marginal product of labor decreases as labor increases. economies of scale. diseconomies of scale. diminishing returns. constant returns to scale. 2 points QUESTION 14 The unemployment rate is computed as the number of employed divided labor force. the number of unemployed...
3. The firm's demand for a resource and marginal revenue
product
Gopher Excavators produces shovels in a small factory and sells
the shovels in a competitive market. The following table shows the
company's production function:
Labor
Output
(Number of workers)
(Shovels)
0
0
1
90
2
175
3
245
4
300
5
325
Use the blue points (circle symbol) to plot the production
function for Gopher Excavators on the following graph.
Production Function01234540036032028024020016012080400OUTPUT
(Shovels)LABOR (Number of workers)
Calculate the marginal...
#1 (2 points) What are the relationships that the aggregate production function repre- sents? As a hypothetical example, describe each part of the function as if the variables represent data from the United States. #2 (2 points) In economics, what is the difference between the short run and long run? Is the aggregate production function a short run or long run model? #3 For this question use this aggregate production function: Y = AK1/4 [3/4 Part A) (2 points) Does...