93) Explain the difference between the short run and the long run as it relates to the firm's production function. Why is this distinction important to a firm's manager? 94) Use the following information on a hypothetical short-run production function to answer questions a-c. Units of Labor/Day56789 Units of Output/Day120140155165168 The price of labor is $20 per day. Ten units of capital are used each day, regardless of output level. The price of capital is $50 per unit. a. Calculate the marginal and average variable product of each unit of labor input. b. Calculate total, average total, average variable, and marginal costs. c. Can you tell where diminishing marginal returns sets in? 95) When demand for a firm's product decreases, the firm can take a number of steps to adjust costs and quantities supplied to the market. Some are listed below. Which actions are short run and which are long run? Explain your reasoning. a. Layoff 25 percent of the firm's existing employees. b. Declare bankruptcy and sell all of the firm's plant and equipment. c. Require management personnel to take a significant cut in pay. d. Furlough employees for 3 days each month. e. Move to a smaller production facility.
93) Explain the difference between the short run and the long run as it relates to the firm's production function. Why is this distinction important to a firm's manager?
94) Use the following information on a hypothetical short-run production function to answer questions a-c.
Units of Labor/Day56789
Units of Output/Day120140155165168
The price of labor is $20 per day. Ten units of capital are used each day, regardless of output level. The price of capital is $50 per unit.
a. Calculate the marginal and average variable product of each unit of labor input.
b. Calculate total, average total,
c. Can you tell where diminishing marginal returns sets in?
95) When demand for a firm's product decreases, the firm can take a number of steps to adjust costs and quantities supplied to the market. Some are listed below. Which actions are short run and which are long run? Explain your reasoning.
a. Layoff 25 percent of the firm's existing employees.
b. Declare bankruptcy and sell all of the firm's plant and equipment.
c. Require management personnel to take a significant cut in pay.
d. Furlough employees for 3 days each month.
e. Move to a smaller production facility.
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