6. Optimal choice of capital Ginny makes sweaters in her home. She started with just some knitting needles and yarn and was able to knit 60 sweaters per year. Now some local stores have expressed interest in her designs and have offered to buy her sweaters for $10 each. This makes it worthwhile for her to invest in some capital; in particular, she could produce many more sweaters if she invested in one or more looms, as shown in the following table. Complete the following table by calculating the marginal product (MP) of each loom and the marginal revenue product (MRP) of each loom. Quantity of Input MP of Each Loom (Sweaters) MRP of Each Loom (Dollars) (Looms) 0 1 2 3 4 5 Output (Sweaters per year) 60 110 150 184 213 238 If the rental price of a loom is $315 per year, Ginny should use

6. Optimal choice of capital Ginny makes sweaters in her home. She started with just some knitting needles and yarn and was able to knit 60 sweaters per year. Now some local stores have expressed interest in her designs and have offered to buy her sweaters for $10 each. This makes it worthwhile for her to invest in some capital; in particular, she could produce many more sweaters if she invested in one or more looms, as shown in the following table. Complete the following table by calculating the marginal product (MP) of each loom and the marginal revenue product (MRP) of each loom. Quantity of Input MP of Each Loom (Sweaters) MRP of Each Loom (Dollars) (Looms) 0 1 2 3 4 5 Output (Sweaters per year) 60 110 150 184 213 238 If the rental price of a loom is $315 per year, Ginny should use

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Only typed answer

Suppose the demand for sweaters is very elastic, while the demand for cigarettes is very inelastic.
Suppose that looms are used exclusively in the production of sweaters and that tobacco is used exclusively in the production of cigarettes. Which of
the following would you expect?
The supply of looms would be more elastic than the supply of tobacco.
The demand for looms would be less elastic than the demand for tobacco.
The demand for looms would be more elastic than the demand for tobacco.
The supply of looms would be less elastic than the supply of tobacco.

6. Optimal choice of capital
Ginny makes sweaters in her home. She started with just some knitting needles and yarn and was able to knit 60 sweaters per year. Now some local
stores have expressed interest in her designs and have offered to buy her sweaters for $10 each. This makes it worthwhile for her to invest in some
capital; in particular, she could produce many more sweaters if she invested in one or more looms, as shown in the following table.
Complete the following table by calculating the marginal product (MP) of each loom and the marginal revenue product (MRP) of each loom.
Quantity of Input
MP of Each Loom
(Sweaters)
MRP of Each Loom
(Dollars)
(Looms)
0
1
2
3
4
5
Output
(Sweaters per year)
60
110
150
184
213
238
If the rental price of a loom is $315 per year, Ginny should use

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