Capital (K) Labor (L) Output (q) 8 0 0 8 1 6 8 2 13.5 8 3 23.5 8 4 31 8 5 37 8 6 42 8 7 46 8 8 49 8 9 51.4 8 10 53.4 Let r = $20 be the price of one unit of capital, and w = $60 be the price of one unit of labor. a. Assume the table represents the production technology of a firm. What are the firm’s output and result (profit or loss) in the short run when the price is $6, $8, $10, $12, $15, and $20? b. If the market is formed by 100 identical firms like this one, what’s the short-run market supply at each of the prices listed in 1.a? c. How would your answers to 1.a and 1.b change if you consider the long run instead? (Assume that each firm still uses 8 units of capital for any output level when producing.) d. How much would you expect each firm to make in profits in the long run if there is free entry and exit in this market? What would be the market price and quantity? You do not need to
| Capital (K) | Labor (L) | Output (q) |
| 8 | 0 | 0 |
| 8 | 1 | 6 |
| 8 | 2 | 13.5 |
| 8 | 3 | 23.5 |
| 8 | 4 | 31 |
| 8 | 5 | 37 |
| 8 | 6 | 42 |
| 8 | 7 | 46 |
| 8 | 8 | 49 |
| 8 | 9 | 51.4 |
| 8 | 10 | 53.4 |
Let r = $20 be the
a. Assume the table represents the production technology of a firm. What are the firm’s output
and result (profit or loss) in the short run when the price is $6, $8, $10, $12, $15, and $20?
b. If the market is formed by 100 identical firms like this one, what’s the short-run market supply
at each of the prices listed in 1.a?
c. How would your answers to 1.a and 1.b change if you consider the long run instead? (Assume
that each firm still uses 8 units of capital for any output level when producing.)
d. How much would you expect each firm to make in profits in the long run if there is free entry
and exit in this market? What would be the market price and quantity?
You do not need to
give exact numbers for the price and quantity—a range is fine.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 3 images
