4. Given the following graph, briefly respond tothe questions appearing directly below thisgraph.СapitalA14103.Isoquant forOutput = 60C%3D3.Isoquant forE/Output = 40%3D2 39 11Labora. For an output level of 40 units, calculate themarginal rate of technical substitution betweenpoints A and B.b. Also for an output level of 40 units, calculatethe marginal rate of technical substitution be-tween points D and E.

The marginal rate of technical substitution (MRTS) in terms of economy describes the rate at which…

4. Given the following graph, briefly respond to the questions appearing directly below this graph. Capital 14 10 3D Isoquant for Output = 60 C %3D D 3 Isoquant for E/ Output = 40 %3D 23 9 11 Labor For an output level of 40 units, calculate the marginal rate of technical substitution between points A and B. b. Also for an output level of 40 units, calculate the marginal rate of technical substitution be- tween points D and E.

4. Given the following graph, briefly respond to the questions appearing directly below this graph. Capital 14 10 3D Isoquant for Output = 60 C %3D D 3 Isoquant for E/ Output = 40 %3D 23 9 11 Labor For an output level of 40 units, calculate the marginal rate of technical substitution between points A and B. b. Also for an output level of 40 units, calculate the marginal rate of technical substitution be- tween points D and E.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A firm is currently producing 500 units of output daily by employing 60 units of labor daily at a price of $10 per unit and 30 units of capital daily at a price of $20 per unit. The marginal product of the last unit of labor employed is 3, and the last unit of capital employed is 5. a. Given the above information, what does the firm's marginal rate of technical substitution, MRTSL,K, equal? b. Indicate on the following diagram some point labeled A that is consistent with the information given in the question.
2. in the table below, the average product of labor at L=3 is: 1 2 7 15 20 a. 0.2 b. 2 c.8 d. 5 e. 3
3. We often work with production technologies that give rise to initially increasing marginal product of labor that eventually decreases. Are the following statements then True or False? Explain.The marginal product of labor becomes negative when the slope of the production frontier begins to get shallower as we move toward more labor input.
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Suppose that this conveyor-manufacturing firm has another location and would like you to evaluate the input mix decisions at this new location. Here is all you know about the newlocation. The marginal rate of technical substitution is currently 0.5. The marginal product of labor at its target level of output is 60 rollers per hour. What is the marginal product of capital? Ifthe rental rate for capital is $24 per hours at this location and the wage paid to labor is $12 per hour, could this location be minimizing the costs of producing its target level of output? Explain briefly.
3. Theo employs labor at a competitive wage (W) of $3 per unit, and he employs capitalat a competitive rental rate (R) of $6 per unit.a. State the cost-minimizing rule. You must provide both a written statement of it, and state it as anequation.b. At Theo’s current combination of labor and capital, the marginal product of labor (MPL) is twiceas large as the marginal product of capital (MPK). Is Theo currently employing the optimal ratio oflabor and capital? If not, how should he adjust his hiring of labor and/or capital? Explain.