1.) Using appropriate diagram (s) explain why the competitive wage is the same across a homogenous market. 2.) Using the formular below explain why a firm can only control its demand for labour/employment while trying to maximize profit in the short run. Profits = pq - wE- rK Where p is for price, q is for output, w is for wage rate, E is for number of workers, r is the cost of capital and K is for capital. 3.) State 2 reasons for wage differentials and give a short explanation of each (2 sentences maximum for each of them)

1.) Using appropriate diagram (s) explain why the competitive wage is the same across a homogenous market. 2.) Using the formular below explain why a firm can only control its demand for labour/employment while trying to maximize profit in the short run. Profits = pq - wE- rK Where p is for price, q is for output, w is for wage rate, E is for number of workers, r is the cost of capital and K is for capital. 3.) State 2 reasons for wage differentials and give a short explanation of each (2 sentences maximum for each of them)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A8
4. For each of the following production functions, write the equation and graph the supply curve of the firm if w=20 and r=50 When the price of output is $20, how much will the firm offer to the market and what are the profits of the firm? a. Q = 10 K^.2L^.5B^.1 in the long-run with capital flexible. B is the amount of Building Space employed, which is held fixed at 1 unit in both the long-run and the short-run and has a price of $100 per unit. b. Q= (4K^.6 + 8L^.6)^ 1.25
5. 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. 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. b. Suppose the wage increases to $15 per unit. In which direction does the substitution effect change the firm's demand for labor and capital? In which direction does the scale effect change the firm's demand for labor and capital? c. If the firm chooses its labor and capital combination to minimize its production costs, will the marginal product of labor be higher than, lower than, or equal to the marginal product of capital? Why? (Assume that the price of labor and capital are those given in part b.)
1. Suppose that a profit-maximizing firm, operating in a perfectly competitive market, uses the following production function:F(L,K) = L^1/2 + 2(K^1/2) where L are the units of labor and K the units of capital. Suppose further that in order to operate, the firm must pay the government a fixed value patent of $ 50, no matter how much it decides to produce. Finally, consider that the factor price is given by w = 1 and r = 4, respectively.(a) Calculate the TMST, placing L on the x-axis. What value does the TMST take when L = 0, and what value does it take when K = 0? Explain if you can orthere are no corner solutions to the cost minimization problem.(b) Find the conditional demands L (q) and K (q), and the cost function C (q) in the long run.2. A company has a production function equal to f (L, K) = 2L + βK. Suppose that the firm currently achieves a level of production equal to q0, using for this a certain amount of capital and labor.(a) If the firm wanted to decrease the amount of…
Modified True or False: State whether each statement is true or false. If the statement is false, briefly explain why it is so, and then restate it to make it true. The shapes of long-run cost curves follow directly from the assumption of a fixed factor of production, which implies diminishing returns. The optimal scale of plant is the scale of plant that maximizes average cost. In the long-run competitive equilibrium, each individual firm chooses a scale of operations that minimizes its long-run average cost. Answer correctly and explain within 30mins will give you positive feedback.
4. A competitive firm has the three-factor production function f(x, y, z) = (x + y)2/3z4/3. The factor prices used to be w = 4, wy = 2, and w, = 1. Suppose %3D that the price of factor y doubled while the other two prices stayed the same. Then the minimum cost of production: A. doubled. B. increased by more than 50% but less than 100%. C. increased by less than 50%. D. stayed the same.
3. Profit maximization using total cost and total revenue curves Suppose Madison operates a handicraft pop-up retail shop that sells phone cases. Assume a perfectly competitive market structure for phone cases with a market price equal to $25 per phone case. The following graph shows Madison's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for phone cases for quantities zero through seven (including zero and seven) that Madison produces. TOTAL COST AND REVENUE (Dollars) 200 175 150 125 100 75 50 0 * U 0 1 O 2 n D 0 3 QUANTITY (Phone cases) ■ Total Cost O Total Revenue Profit Calculate Madison's marginal revenue and marginal cost for the first seven phone cases they produce, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity.
Price per unit (OMR) Shoe sales per week 60 100 50 200 40 300 30 400 20 500 10 600 Consider a firm uses only labor as a variable factor of production in the short run, with the help of a example in the tabular form to express the marginal costs, marginal revenue and output levels where the firm maximizes profit. Draw a diagram corresponding to the table. Useful resources: Principles of Microeconomics, Case Fair, 10th edition. El-Sayed Emarah, R., Abou-El-Wafa, E., & El-Malaaha, G. (1983). Input Price Mechanism in Relation to Current Market Constraints (No. 1566-2016-133411).
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3. There are two profit maximising firms, Alpha Inc. and Beta Ltd. Both use labour, L and capital, K to produce their output, Q and they both employ workers at the minimum wage. Following a government review, the national minimum wage rises from W₁ to W₂. (a) Use an isoquant/isocost diagram to show how this will affect Alpha's optimal choice of inputs, assuming it wants to continue to produce the same output. (b) Following the increase in the wage rate, Alpha Inc. reduces the number of workers employed by significantly more than Beta Ltd. Construct the demand curve for labour for Alpha Inc. and explain how and why its shape will change if you graphed the same curve for Beta Ltd. There is a third firm in this market called Gamma plc. which also uses labour and capital to produce output, where w is the price of labour, r is the price of capital and Q is the output. Suppose that Gamma plc. is a price-taking firm and faces a cost function: 1 1 c(w,r,Q) = — w²r²Q² (c) By deriving an…
Q.4 1.) State whether it is True/False and provide an explanation for each. An example or counterexample could be provided too. A.)If the production technology is neither increasing returns to scale nor decreasing returns to scale, then it must be constant returns to scale. B.) In the real-world, marginal cost curve is usually U-shaped. Therefore, in a perfectly competitive market, a firm can maximize profit at two different output levels in the short-run.