1. Production function and the costs of factors of production are:
In the short run, M is fixed at 1. The production function is:
Cost associated with this production function is
Average Cost is 1
When M is fixed at 2, the production function is:
Cost associated with this production function is
Average cost is 0.5
When M is fixed at 3, the production function is:
Cost associated with this production function is
Average cost is 0.33
2. In the long run, the production function is:
At equilibrium, the marginal rate of technical substitution is equal to the ratio of the factor prices:
Using this value of L, the production function is:
Cost associated with this production function is:
Average cost is
Bob Thomason produces theorems using hours of labor and Big Machines. In the short run, his...
Bob Thomason produces theorems using hours of labor and Big Machines. In the short run, his labor is a variable factor but the number of Big Machines is fixed. When he works for L hours using M Big Machines, Bob can produce L·M theorems. There are only 3 Big Machines in the world, and they can only be rented in whole number quantities (you can not employ 1/2 of a Big Machine). Bob's time is worth $1 per hour, and...
Pontus produces hand woven rugs in his garage using needles (k) and his own labor (l) as inputs, where labor is measured as the number of hours per day that Pontus works. In the short run, the number of needles is fixed at k1 = 1. Pontus is at his efficient scale when he produces 10 rugs per day, and the marginal product of Pontus labor then equals 5 rugs per hour. How many hours per day does Pontus work...
4. A company produces economic analysis reports using hours of labor (L) and computers (K). The production function is ? = 2?√? Initially, in the short run, they have just 1 computer (K = 1). The wage is $20 per hour, and the cost of capital is $10. a. Derive short run total cost and short run average costs curves, with costs as a function of q. Do these costs curves exhibit economies or diseconomies of scale? Explain. (5) b....
Q9. A perfectly competitive firm operates in the short-run with labor as its only variable factor. Its production function is: Q = -L3 + 10L2 + 88L where Q is output per week measured in tons and L is the number of workers employed. The weekly wage is $324 and the product sells for $3.24 per ton. (a) At what weekly output is marginal cost equal to average variable cost? (b) What is the minimum product price...
Suppose a short-run production function is described as Q = 1L - (1/800)L2 where L is the number of labors used each hour. The firm's cost of hiring (additional) labor is $20 per hour, which includes all labor costs. The finished product is sold at a constant price of $40 per unit of Q. a. State the firm's MPL: b. How many labor units (L) should the firm employ per hour: c. Given your answer in b, what is the...
Can someone please help me solve this? 1. A basic assumption of the short run is that a firm: A) B) C) can employ more workers and add more capital to the production process. cannot adjust its workforce or the amount of capital it uses. can reduce the number of workers it uses, but it cannot adjust how much capital it D) can freely adjust the amount of labor and capital that it employs. Use the following to answer question...
Technique A B C D Labor (hours) 10 25 10 30 Capital (machines) 35 25 60 20 23) In the above table, the technique that is not technologically efficient is A) A. B) B. C) C. D) D. 24) The short run is a period of time in which A) the quantity used of at least one factor of production is fixed. B) the quantities used of all factors of production are fixed. C) output prices are fixed. D) factor...
A firm produces toasters using capital (K) and labor (L). The price of capital is r > 0 and the price of labor is w > 0. The quantity Q of toasters produced is given by the function: Q = f(L, K) = L^(1/2) K^(1/3) (a) What type of returns to scale does the firm have? (b) Assume that the firm minimizes costs and that all factors are variable . i. Explain the conditions that hold when the plant produces...
Techniques that produce 100 sweaters Labor Capital Technique (hours) (machines) 10 B 25 25 10 60 D 30 20 23) In the above table, the technique that is not technologically efficient is A) A. B) B. C) C. DD. 24) The short run is a period of time in which A) the quantity used of at least one factor of production is fixed. B) the quantities used of all factors of production are fixed. C) output prices are fixed. D)...
Touchie MacFeelie publishes comic books. The only inputs he needs are old jokes and cartoonists. His production function is Q = J1/2 * L3/4, where J is the number of old jokes used, L the number of hours of cartoonists’ labor used as inputs, and Q is the number of comic books produced.1) Touchie MacFeelie’s irascible business manager, Gander Mac-Grope, announces that old jokes can be purchased for $1 each and thatthe wage rate of cartoonists’ labor is $2.(a) Suppose...