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3. The wage rate is £10 and the capital rate is £20. If a firm was spending £c, show what combinations of labour and capital are possible in an equation. Represent the combinations possible if the firm spent £200, £400, or £600 in a suitably labelled graph.

3. The wage rate is £10 and the capital rate is £20. If a firm was spending £c, show what combinations of labour and capital are possible in an equation. Represent the combinations possible if the firm spent £200, £400, or £600 in a suitably labelled graph.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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PLEASE ANSWER ONLY QUESTION 3

Section one-theory A: Key concepts 1. What is the difference between production in the short- and long-run? What does it mean for two inputs to be perfect substitutes? 2. B: Theory: Cost Minimisation (isocost-lines and production) Note: In the class, I will put capital on the ‘'Y' axis and labour on the 'X' axis. Obviously, the choice doesn't matter mathematically, but if you want your graph to look like mine, do the same! 3. The wage rate is £10 and the capital rate is £20. If a firm was spending £c, show what combinations of labour and capital are possible in an equation. Represent the combinations possible if the firm spent £200, £400, or £600 in a suitably labelled graph. 4. A firm has technology such that it can produce... q=L+K a. What name do we give to this production function? b. Assume output q = 30. Draw the isoquant in a suitably labelled graph. 5. Assuming the same wages and technology as before - how much does it cost the firm to produce q = 30? How much labour does it employ? How much capital? Section two-theory and policy C: The Battle for Ritzy Cinema II this time, it's personnel Patrons at the Ritzy cinema can either buy their tickets at the counter (from a person) or enter their credit card into a machine, who will print out a ticket. A long line of people would like to work for the Ritzy. Ticket machines can be ordered from Germany in 6 months. 6. Prior to the battle for wages, the ritzy had two machines and four members of staff. Staff were paid £50/day while the machines were rented for £10/day. What were the Ritzy's costs? 7. After the battle for wages, the staff were paid £80/day. Assuming that (i) workers and machines are neither perfect compliments nor perfect substitutes and (ii) the Ritzy doesn't want to open for fewer hours - outline how the Ritzy might respond in the short run. How many workers will it employ? How many machines? What will happen to its costs? 8. Outline how the Ritzy cinema might respond in the long-run. (Exact numbers not needed –a graphical explanation is fine.)
Transcribed Image Text:Section one-theory A: Key concepts 1. What is the difference between production in the short- and long-run? What does it mean for two inputs to be perfect substitutes? 2. B: Theory: Cost Minimisation (isocost-lines and production) Note: In the class, I will put capital on the ‘'Y' axis and labour on the 'X' axis. Obviously, the choice doesn't matter mathematically, but if you want your graph to look like mine, do the same! 3. The wage rate is £10 and the capital rate is £20. If a firm was spending £c, show what combinations of labour and capital are possible in an equation. Represent the combinations possible if the firm spent £200, £400, or £600 in a suitably labelled graph. 4. A firm has technology such that it can produce... q=L+K a. What name do we give to this production function? b. Assume output q = 30. Draw the isoquant in a suitably labelled graph. 5. Assuming the same wages and technology as before - how much does it cost the firm to produce q = 30? How much labour does it employ? How much capital? Section two-theory and policy C: The Battle for Ritzy Cinema II this time, it's personnel Patrons at the Ritzy cinema can either buy their tickets at the counter (from a person) or enter their credit card into a machine, who will print out a ticket. A long line of people would like to work for the Ritzy. Ticket machines can be ordered from Germany in 6 months. 6. Prior to the battle for wages, the ritzy had two machines and four members of staff. Staff were paid £50/day while the machines were rented for £10/day. What were the Ritzy's costs? 7. After the battle for wages, the staff were paid £80/day. Assuming that (i) workers and machines are neither perfect compliments nor perfect substitutes and (ii) the Ritzy doesn't want to open for fewer hours - outline how the Ritzy might respond in the short run. How many workers will it employ? How many machines? What will happen to its costs? 8. Outline how the Ritzy cinema might respond in the long-run. (Exact numbers not needed –a graphical explanation is fine.)
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