Consider a firm that produces output using a typical production function as discussed in thecourse, and that hires workers in a competitive labor market.1. Explain what determines the firm's choice of its labor input. Use a suitable figure.Discuss how changes in the capital stock and in the wage affect the firm's choice of itslabor input.Suppose that the firm uses a Cobb-Douglas production function Y = K"N-«.In this case, the marginal product of labor is given by (1 – a)K“N-«.The parameter a is 2/3, and the firm uses one unit of capital.2. Calculate (show your steps) how the firm's labor input changes if the wage increases by1%.3. Calculate how the firm's labor input changes if the wage is unchanged, but the firmdecides to double its capital stock.

A Cobb-Douglas production function model is often defined as a connection between production yield…

Answered: Consider a firm that produces output…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Consider the following production function: q = 9LK + 6L² – Assuming capital is measured on the vertical axis and labor is measured on the horizontal axis, determine the value of the marginal rate of technical substitution when K= 30 and L= 10. MRTS = -. (Enter a numeric response using a real number rounded to two decimal places.) 20 tv MacBook Air F6 FB 10 F3 23 2$ & з 4 6 7 8 { [ E Y U P D F G J K > C V N M command option - .. .- B
Consider the following production function that depends only on labor:Q = 4L + 12L² - 6L³ 1. Compute the APL (average product of labor). 2. Compute the MPL (marginal product of labor). 3. What is the value of L* at which APL is the highest? 4. For L > L*, which one is bigger, APL or MPL? How about when L < L* and L = L*? 5. Draw APL and MPL on the y-axis as a function of L on the x-axis. Label the point of the intersection of APL and MPL.
suppose Mark operates the production of lawnmowers at Mark Mowers and Bros. Using inputs like labor (L) and capital (K). over his time as a production manager, he has found out that the production function, in the long run, is Q=500*min (L,7K). Given this information, help him determine the following. b. Assume for the time being that he has only one unit of capital to employ in this factory. What would be the total product, the marginal product, and the average product of the labor curve? Draw all three of them. Also make sure that you create a table using the different combinations of L and K that helps you in determining the shape of these curves.
Sandwiches, a sandwich shop, has the following marginal product curve (labelled MP) for its hourly productions hourly production.
In economics and econometrics, the Cobb-Douglas production function is a particular functional form of ne production function, widely used to represent the technological relationship between the amounts of two r more inputs (particularly physical capital and labor) and the amount of output that can be produced by nose inputs. The function they used to model production is defined by, P(L, K) = 6LªK!-a where P is the total production (the monetary value of all goods produced in a year), L is the amount f labor (the total number of person-hours worked in a year), and K is the amount of capital invested (the onetary worth of all machinery, equipment, and buildings). Its domain is {(L, k)|L > 0, K > 0} because L nd K represent labor and capital and are therefore never negative. Show that the Cobb-Douglas production function can be written as P P(L, K) = 6LªK1-a → In K L In b+ a ln K
Suppose a firm’s production function is ? = ?2?. a) Determine the labor and capital demand functions. b) Are capital and labor normal or inferior inputs in this production process?
WickCo makes decorative candles, and its production function is given as Q = K+ L, where K is the units of capital, and L is the units of labor used in the production process. a. In the diagram below, draw the isoquant for WickCo. for output level Q = 10. The diagram below is a 10x10 grid b. Suppose the wage rate is $50 per unit of labor and the rental rate of capital is $55 per unit. In the diagram given in part (a), show the cost minimizing input combination for Q = 10 and draw the associated isocost line. What is the total cost of production at the cost minimizing input combination?

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