(a) Explain intuitively why a firm's average cost curves are U-shaped and why does itsaverage variable cost curve achieve its minimum at a lower level of output than the averagetotal cost curve? (b) You are given the following data on output and inputs for 10production periods:TIMEOUTPUTCAPITAL (K)LABOR (L)12251220240142232781024421214185205122062971624724216208155101421282010180814Estimate the parameters (A, a, ß ) of Cobb-Douglas production function usingthe Least-squares (OLS) regression method. [ Assume Q = AK“ L® ]. Use theestimated parameters to determine: Returns to Scale, Equations for the marginalproduct of labor and Capital. Calculate the marginal products of capital and laborfor the input combinations: K = 10, L = 25. Make a comment based on yourfindings.

Since you have asked multiple questions, we will solve the first question for you. If you want any…

(a) Explain intuitively why a firm's average cost curves are U-shaped and why does its average variable cost curve achieve its minimum at a lower level of output than the average total cost curve? (b) You are given the following data on output and inputs for 10

(a) Explain intuitively why a firm's average cost curves are U-shaped and why does its average variable cost curve achieve its minimum at a lower level of output than the average total cost curve? (b) You are given the following data on output and inputs for 10

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: What is the difference between average product of labor and marginal product of labor? (b) Explain…

A: Average Product of Labor is calculated by dividing the total output produced by the firm with the…

Q: The accompanying table shows the total daily output for a firm producing specialty cakes operating…

A: Total fixed cost (TFC) is that cost which does not change with a change in the level of output.…

Q: Microeconomics - Production Function A firm produces shoes using labor (L) and machinery (K) as…

A: Marginal product of labor refers to the additional amount of labor required to increase output by…

Q: True or False: The shape of the total physical product curve reflects the law of increasing marginal…

A: The law of increasing marginal returns also called the law of diminishing costs states that as far…

Q: You have been hired by Kia as manager for its Pakistan operations. Assume following is the short-run…

A: “Since you have posted a question with multiple sub-parts, we will provide the solution only to the…

Q: Question 1 erive the equation for and plot AFC(q), AVC(q), AC(q), and MC(q) for the following cost…

Q: A farmer uses a certain technology that produces electricity. His production function is given as: q…

A: Production function shows the relationship between the input used and the output produced. The…

Q: 13. Suppose you have a production technology given by f(x1,x2) = min{2r1, r2} and you are producing…

A: In a market, when a firm produces a product, it requires various input resources like labor, raw…

Q: A Moving to the next question prevents changes to this answer. Question 1 Cost schedule Total…

A: Total Variable Cost is consist of total (variable + fixed) cost Variable expenses are those costs…

Q: Suppose you run a factory whose short-run production function is given by f (L) = 180L² – 3L³. (a)…

A: TPL = 180L2 - 3L3 APL = TP/L = 180L - 3L2 MPL = CHANGE IN TP/CHANGE IN L = 360L - 9L2

Q: Mark launders his white clothes using the production function q=3B+G, where B is the number of cups…

A: Production function: Here B denotes the number of cups of Clorox bleach and G denotes the number of…

Q: Question 8 of 13 The following diagram depicts the production function of the farmers, where…

A: Production function:Production is a function of land labor capital and entrepreneurship. It includes…

Q: With the data provided in the following table it is requested: (a) Calculate the marginal product…

A: Total Product (TP): Total Product (TP) refers to the total output or quantity of goods produced by…

Q: Define the production function, f(x), and the average product associated with it. How do you…

A: Production is the process of transformation of inputs into output by using factors of production .…

Q: You have been hired by Kia as manager for its Pakistan operations. Assume following is the…

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…

Q: The only variable input a janitorial service firm uses to clean offices is workers who are paid a…

Q: A firm has a production function of Q(K,L) = K04L0.6 a) Explain the concept of returns to scale.…

A: The production function reflects the positive relationship between inputs (land and labor) and…

Q: What is meant by an expansion path? Illustrate expansion paths for a normal input and an inferior…

A: The expansion path may be defined as the locus of the points of tangency between the Isoquant curve…

Q: 1/3 1/3 2. Earl sells lemonade in a competitive market on a busy street corner in Philadelphia. His…

A: Production function is the mathematical expression in economics that postulates the relationship…

Q: Consider the production function Q = 32K L (a) By dividing by L, find the Average Product of Labour…

A: The production function is the combinations of the labor and capital which are required to produce…

Q: (a) Suppose we have the following production function: Q = K²/³12/3. Does the technology have…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: Fill in the remaining cells of the following table. Quantity Total Cost Marginal Cost Fixed Cost…

A: In case of short-run average cost functions, the firm incurs two types of costs:-Fixed costs and…

Q: Complete the following table, which shows the amount of ore produced (measured in tons) when various…

A: Total product is the total amount manufactured per a set of resources, average product is the…

Q: 6)ABC company is using labor and capital to build widgets The last employee produced 20 more widgets…

A: 6. The marginal product of labour = 20 The price of labour = $10 The marginal product of…

Q: A firm can manufacture a product according to the production function Q = F(K, L) = KO.50LO.50. (a)…

A: The production function refers to the functional relationship between the given input and the…

Q: “Inflation benefits the rich and hurts the poor” and asks for your assessment as an economist. What…

A: Inflation is the process of the abnormal rise in the general price level in the economy. Thus, the…

Q: a. Graphically illustrate this situation on a graph using isoquants and isocost lines. Explain…

A: Solution a:For the given graph a, the the labor is 160 units and capital is 5 units. The labor input…

Q: Consider the input output table below Table (Inter) final Total (Agric) (Manuf) (Mining)demand…

A: Given information

Q: 2. Show that the two-input CES production function used in this lecture has DRS, CRS or IRS…

A: Constant returns to scale means as we imposed input by double amount then the output increases by…

Q: Exercise A.5 A company operates with production function q=K¹/2¹/2 a) What type of returns to scale…

A: Returns to scale refers to the proportional increase in output as a consequence of increasing the…

Q: A firm faces the production function: q=10L^0.32 K^0.56 (a) What kind of returns to scale does…

Q: Consider the production function f (L,K) = 10(L + 3K) a. Draw the isoquant qo 600, being careful to…

Q: A Cobb-Douglas production function for new company is given by FF(KK, LL) = KK3/5LL2/5 where K…

A: The optimal quantity of labor and capital would be when MPL / MPK = W / R

Q: Give the formulas for and plat average fixed cest, AFC, marginal cast, MC, average variable cost,…

A: Cost curves are graphical representations of the relationship between the quantity of goods or…

Q: 2) The Trouser Company has fixed costs of 2,000 per week. In addition, we have some information…

A: The following are the cost conditions of the company :

Q: A company produces commercials. A 2-minute commercial, for example, needs exactly 5 minutes of…

A: Production function is used to explain how inputs and outputs relate to one another during the…

Q: 6) If a firm produces 100 units of output and has an average total cost of $6 then what is their…

A: Average total cost refers to total cost divided by a total unit of output produced. It is the sum of…

Q: Suppose that the labor cost of Conchita-crem is $20 USD per hour, and the cost of capital is $5 USD…

A: “Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: relationship between total product, marginal product, and average product

A: Total product(TP) is the cumulative quantity of output(Q) that is produced by a firm. Average…

Question

(a) Explain intuitively why a firm's average cost curves are U-shaped and why does its
average variable cost curve achieve its minimum at a lower level of output than the average
total cost curve? (b) You are given the following data on output and inputs for 10
production periods:
TIME
OUTPUT
CAPITAL (K)
LABOR (L)
1
225
12
20
240
14
22
3
278
10
24
4
212
14
18
5
205
12
20
6
297
16
24
7
242
16
20
8
155
10
14
212
8
20
10
180
8
14
Estimate the parameters (A, a, ß ) of Cobb-Douglas production function using
the Least-squares (OLS) regression method. [ Assume Q = AK“ L® ]. Use the
estimated parameters to determine: Returns to Scale, Equations for the marginal
product of labor and Capital. Calculate the marginal products of capital and labor
for the input combinations: K = 10, L = 25. Make a comment based on your
findings.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

(6) Which of the following statements best describes firm's cost-minimizing behaviors? a) A firm's cost is minimized when the isocost line and the isoquant are tangent. b) A firm's cost is minimized when the marginal rate of technical substitution is greater than he slope of the iso cost line. c) A firm's cost is minimized when the slope of the tangent of the isoquant is less than the slope of the isocost line.
Refer to the graph below: y2 The graph above illustrates a production set of a firm. (a) Which assumption(s) do(es) the production set violates? Explain. (b) Suppose the firm decided to scale all inputs up or down by some amount t > 0. What will happen to the level of output?
A firm has the production function f(X, Y) = x²/2 y1/2, where X is the amount of factor x used and Y is the amount of factor y used. On a diagram we put X on the horizontal axis and Y on the vertical axis. We draw some isoquants. Now we draw a straight line on the graph and we notice that wherever this line meets an isoquant, the isoquant has a slope of -3. The straight line we drew Select one: O a. is vertical. b. is horizontal. c. is a ray through the origin with slope 3. d. is a ray through the origin with slope 4. O e. has a negative slope.
Please help me understand this with explanation and complete solutions thank you
Isoquant curves The Firm can trade two doctors for five gardeners and output remains constant What is the shape is the isoquant curve for the firm? (doctors on x axis) Find slope of curve at: (20,15) (5,25) (5,15)
For its current level of production, a firm is attempting to minimize its costs. The firm has determined that the marginal product of labor is 10, the marginal product of capital is 20 and the cost per unit of labor is $5, whereas the cost per unit of capital is $10. To minimize cost for the given output the firm should Increase the amount of capital and decrease the amount of labor Leave the amount of capital and labor as they are Decrease the amount of capital and increase the amount of labor
: Suppose that the production functions be like as (A) i) Y = X15 X20.5 ii)Y= X10.5 + X20.5 Find MRTS of these functions
You have been hired by Kia as manager for its Pakistan operations. Assume following is the short-run production function at their assembly plant outside Karachi: Q = 10L^2 – 0.5L^3 where L is variable input labor, Q is output of Cars assembled a. Find the ranges of the three stages of production. b. Demonstrate the relationship between Total Production, Marginal Product and AverageProduct in a hypothetical graph and clearly label the three stages as per the values of Lyou observed in (a) above. c. At the end of the year it is expected that output will double with purchase ofnew equipment and machinery. The production function is estimated to be Q = 60L^.30K^.70 where L is labor and K is capital. Suppose initial L1 = 1 and K1 = 1. When inputs are in increased to L2 = 2 and K2 = 2, do you observe increasing, decreasing or constant returns to scale? d. Assume Kia Head Office is considering hiring more laborers either at their Gwadarplant or alternatively at the Karachi plant.…
30. The production function is f(L, M) = 4L1/2 M¹2, where L is the number of units of labor and M is the number of machines used. If the cost of labor is $49 per unit and the cost of machines is $16 per unit, then what is the total cost of producing 5 units of output?