A firm uses two inputs in production: capital and labour. In the short run, the firm cannot adjust the amount of capital it is using, but it is able to adjust the amount of labour it employs. What happens to the firm's average-total-cost curve, the average- variable-cost curve, and the marginal-cost curve when: a. the cost of renting capital increases? b. wages increase?

A firm uses two inputs in production: capital and labour. In the short run, the firm cannot adjust the amount of capital it is using, but it is able to adjust the amount of labour it employs. What happens to the firm's average-total-cost curve, the average- variable-cost curve, and the marginal-cost curve when: a. the cost of renting capital increases? b. wages increase?

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: Question: 1 A firm produces output according to the following production function: q = 10 K^1/4…

A: Cost minimization problem of producer: For the given output level the firm and per unit cost of…

Q: A firm with the production function f(x) = x₁x₂ wants to produce 100 units of output. a. How much of…

A: Returns to scale hold significant importance in firm theory by unveiling the relationship between…

Q: 1/3 1/3 Badgett's Gadgets produces gadgets with the production function, y=x, where x is the…

A: The production function is the mathematical relationship between different bundles of inputs and…

Q: 1.4) An example of innovation rent is: Select one or more: The cost of opening a new factory. The…

A: Opportunity Cost is the value of next best alternative sacrificed i.e. to receive one thing, the…

Q: Quiz 6 Practice Problems Question 1: The production function is given by Y = 2 Sqrt(L) + 2 Sqrt (K)…

A: Production function : Y = 2(L)0.5 + 2(K)0.5 K = 4 Output price is p . Price of Labor = wl Price of…

Q: Consider the production function Q = 4L0.4K0.5 where Q is the total output, L is labour and K is…

A: Production function shows the different combinations of factors of production that can be used to…

Q: In the short run, the firm's amount of capital equipment is fixed at k = 100. The rental rate for k…

A: As per Bartleby guidelines, providing solutions for first four parts.IntroductionCost and production…

Q: A firm has the following Production Function: Q=3K²L² and w=P₁= $10 r=Px=$90 a) If the profit…

A: Firm production function Wage rate w=$10 and rent r=90Cost minimizing output level is 6300We need to…

Q: Consider a production process where flowers are grown (the output) using gardeners (labor) and…

A: Total cost is the sum of fixed cost and variable cost.Fixed cost is the cost that doesn't changes…

Q: Producer theory: suppose a firm has the following production function, given below .Let the wage…

A: wage rate determines the equilibrium in the labour market. Because wage is the price of purchasing…

Q: Suppose the machine rental rate decreases from $20 per hour to $10 per hour, while the rental rate…

A: On an isoquant map, isoclines are curves that cross through locations with similar marginal rates of…

Q: Tausha and Alicia own a coffee shop in town. Their output (cups of coffee per week) in terms of…

A: The marginal rate of technical substitution (MRTS) is an economic idea that measures the rate at…

Q: In the long-run, a firm may only employ capital and labor neither capital

A: The long run refers to period when all factor of production or cost are variables. There is no…

Q: Q7. The production function is y=L¹/aK¹/B. $12. The price of the output is $100, w = $15, and r=; a.…

A: Introduction We have given a production function. Optimal level of input can be achieved at where…

Q: Producer Theory A firm has the following Production Function: Q=3K²L² and w=P₁= $10 r=P = $90 a) If…

A: Producer is in equilibrium at a point where the slope of the isoquant is equal to the slope of the…

Q: hich of the following statements are true? A basic assumption of the theory of production is that:…

A: The process of the combination of various material and immaterial inputs into output for the purpose…

Q: Suppose that a firm's production function is Cobb-Douglas (Y = A K\alpha L1-\alpha) with parameter a…

A: Production function refers to the relationship of total units of inputs and outputs in a production…

Q: Suppose that the price of labor (the wage rate) is $100 a day and that the rental price of capital…

A: Hi, thank you for the question. As per the guidelines, we are allowed to attempt only first…

Q: Lesson 8 - Costs Question 9

A: The correct answer is c. "They could produce the same amount of output at a lower total cost by…

Q: A production function is given by q = 500L + 320K. The price of capital is $120 and the price of…

A: The link between the inputs (factors of production) used in the production process and the output…

Q: A firm has the production function q = K0.25L0.25 , where K is capital, L is labor, and q is output.…

A: ***Since the third subpart of the question has not been mentioned clearly, so, the expert has solved…

Q: According to microeconomic theory, an input factor may be: a. Fixed in the short run, but will…

A: The time horizon that is being considered determines how input factors are classified in…

Q: A firm employs labor and capital by paying $40 per unit of labor employed and $200 per hour to rent…

A: Production function is convex at the first then after the inflexion point becomes concave. An…

Q: In the short run, a tool manufacturer has a fixed amount of capital. Labor is a variable input. The…

A: We have to calculate The equilibrium wage rate and equilibrium level of labour use.

Q: 10) Suppose that a firm uses both labor (L) and capital (K) as inputs. The firm's long-run…

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

Question

A firm uses two inputs in production: capital and labour. In the short run, the firm
cannot adjust the amount of capital it is using, but it is able to adjust the amount of
labour it employs. What happens to the firm's average-total-cost curve, the average-
variable-cost curve, and the marginal-cost curve when:
a. the cost of renting capital increases?
b. wages increase?

Expert Solution

This question has been solved!

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

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Define a production function

VIEW

Step 2: a. Determine the effect of increase in cost of renting capital

VIEW

Step 3: b. Describe the effect of increase in cost of labor hiring

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 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

Assume a firm is trying to maximize output subject to a budget and is currently in the long run equilibrium shown below. Make changes to the graph to show the impact of a decrease in the wage. Make sure that the graph shows the new output-maximizing combination as well as the new levels labor and capital.
Economics: Industrial Economics Question: 1 A firm produces output according to the following production function: q = 10 K^1/4 L^1/4 The price of capital is r = 9 and the price of labor is w = 25 and there is a set-up cost F = 90 that the firm only pays if it decides to produce in the market. If the firm wants to produce 'q' units of output, solve the cost minimization problem. Obtain total cost C* (as a function of output level q). Now assume that the firm operates under monopoly and the inverse demand function is p = 115 - 2 q Use the solution to the cost minimization problem to solve the profit maximization problem of this firm. Determine this firm's price p*. Please Show your Work. a. 55 b. 75 c. 85 d. 65 Question: 2 A firm produces output according to the following production function: q = 10 K^1/4 L^1/4 The price of capital is r = 9 and the price of labor is w = 25 and there is a set-up cost F = 90 that the firm only pays if it decides to produce in the market. If the firm…
help please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all working
Lesson 8 - Costs Question 8
which of the following statements is true? 1. if the marginal product of labour is higher than the marginal product of capital, then the firm uses more labour than capital in the short run. 2.if the wage rate for labour is lower than the cost of capital, then the firm uses more labour than capital in the short run. 3. if for a given amount of initial capital, the production functions means more labour is needed than capital, then the firm uses more labour than capital in the short run. 4. if for a given amount of initial labour, the production function means that more labour is needed than capital, then the firm uses more labour than capital in the short run.
Consider a production process where flowers are grown (the output) using gardeners (labor) and greenhouses (capital). The quantity of flowers grown per day with various combinations of labor and capital are shown in the table below. Suppose that each gardener is paid $200 per day and the greenhouse is rented for $500 per day. Fill in total cost in the table below. (Enter your responses as integers.) Labor Capital Output Total Cost 0 1 0 $ 1 1 160 2 1 480 3 1 640 4 1 720 5 1 760
Output is produced according to Q = 4LK, where Lis the quantity of labor input and K is the quantity of capital input. If the price of K is $10 and the price of L is $5, then the cost-minimizing combination of K and L capable of producing 32 units of output is: L = 2 and K = 4. L = 4 and K = 2. L = 1 and K = 8. L = 8 and K = 1. L = 2 and K = 2.