2. Fresh Steps, a manufacturer of cat litter, has estimated the following production function:Q = 50 LKIn this equation, Q is the output rate (quantity), L is the amount of labor Fresh Steps hires per period of time,and K is the amount of capital Fresh Steps uses per period of time.Fresh Steps pays $10 per unit of labor and $20 per unit of capital. The company's vice president formanufacturing has hired you to determine which combination of inputs the factory should use to produce6,400 units of output per period.a. Provide a recommendation for the vice president. (Calculations required).b. Suppose that the cost of labor increases to $20 per unit. Determine the effect of this change on your answerto part (a). (Calculations required).1c. Determine whether the Fresh Steps factory is subject to increasing or decreasing returns to scale.(Calculations required).

introduction The production function is the mix of inputs effectively used by producers to produce a…

Answered: a. Provide a recommendation for the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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d. Using the table below indicate which firm has (i) diseconomies of scale and (ii) constant returns to scale over the entire range of output. Explain your answer Quantity 1 (Units of output ) 2 4 5 7 Firm A 210 340 490 660 850 1060 1290 Firm B 180 350 510 660 800 930 1050 Firm C 120 250 390 540 700 870 1050 Firm D 150 300 450 600 750 900 1050 3.
13) As a firm hires more labor, in the short run, the A) costs of production are increasing at a fixed rate per unit of output B) output per worker rises 9 extra output of another worker may rise at first, but eventually must fall. D) level of total product stays constant.
Use the following information to answer question 22-23. Number of Workers Hired 4 5 6 7 8 Question 22 Diminishing marginal returns set in when the process.... a) fourth b) sixth c) seventh d) eighth Number of Meals Sold 300 320 worker is added to the production Question 23 Average product will fall above marginal product when the a) fourth b) sixth c) seventh d) eigth worker is hired.
Consider the following information on long run total costs: Output 1 2 3 4 5 6. 7 Total Costs 50 90 123 160 210 270 350 Decreasing returns to scale starts with the addition of the unit of output. Third Fifth Fourth Insufficient information
Refer to the above diagram. Diseconomies of scale?
Output 0 Costs 0 Figure A (2) Input (3) Figure B (1) (4) Output Refer to the short-run production and cost data. In Figure A curve (1) is: total product and curve (2) is average product. total product and curve (2) is marginal product. average product and curve (2) is marginal product. Omarginal product and curve (2) is average product.
a. Define explicit costs and implicit costs. b. Assume the following: * A firm buys a unit of capital for $300. * This capital generates $500 of total revenue for the firm. * This firm could have earned a 10% rate of return from the best alternative use of its $300. Determine the values of explicit cost, implicit cost, and profit. Give economic meaning to the value of profit.
Complete the following table of short-run fixed costs. (Enter your responses rounded to two decimal places.) Total Fixed Cost (TFC) $1,500 Output (9) 1 2 3 4 5 1,500 1,500 1,500 1,500 Average Fixed Costs (AFC) $
Cost (dollars) 150 100 50 0 5 10 D $15 20 B Output (teapots per day) 5. Refer to Figure above. Which one of the following statements are [TRUE/FALSE]? 0 A. The vertical gap between curves B and C is equal to average variable cost. [TRUE/FALSE] 0 B. Average fixed cost decreases with output. [TRUE/FALSE] 0 C. Line B comes closer to line C as output increases because of a decrease in average fixed cost. [TRUE/FALSE] D. The vertical gap between curves B and C is equal to average fixed cost. [TRUE/FALSE] 0 E. Curve D is the marginal cost curve. [TRUE/FALSE]
Assume a firm has fixed costs of $80 and variable costs as indicated in the table below. Complete the cost table. Total variable Total product Total cost AFC ATC MC SO $ 80 1 110 190 2 150 230 180 * 220 300 270 350 340 440 520 660 」二|||| JI|||||
Quantity 1 2 3 4 5 6 7 Firm 4 Firm 3 Long-Run Total Cost (Dollars) Firm 1 Firm 1 180 350 510 660 800 930 1,050 Firm 2 120 250 390 540 700 870 1,050 Refer to Table above. Which firm has economies of scale and then diseconomies of scale over the entire range of output? Firm 2 Firm 3 150 300 450 600 750 900 1,050 Firm 4 210 340 490 660 850 1,060 1,290
30 i of ATC, ATC2 ATC3 -LRATC Output (Q) The diagram above shows the long-run ATC curve for a firm with: Select one: a. diseconomies of scale. b. decreasing returns to scale. С. economies of scale. d. constant returns to scale. $$

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