Givens:minw L+r* KL 2 0, K 20s.t.90 S K5 L3• The marginal product of labor: MPL= .5 K• The marginal product of capital: MPK = .5• Baseline Scenario: w =$10, r = $10 and go = 200• New Scenario: w =$10, r = $2.50 and qo200Equation Description: A firm is attempting to minimize total cost subject to sufficiently employing units of labor and units of capital to produce an output level at least as large as a specified output quota. Totalcost equals the cost to employing units of labor plus the cost to employing units of capital. A firm's production function is the product of two terms: the first term is units of capital raised to the 5 power; and,the second term is units of labor raised to the 5 power. The marginal product of labor equals the product of three terms: the hrst term is 5: the second term is units of capital raised to the 5 power; the thirdterm is units of labor raised to the -5 power. The marginal product of capital equals the product of three terms. the first term is 5: the second term is units of labor raised to the 5 power; the third term is unitsof capital raised to the - 5 power. As a baseline scenario: The wage rate is $10 per unit of labor: the rental rate is $10 per unit of capital: and, the output quota is 200 units. As a new scenario: The wage rate is$10 per unit of labor; the rental rate is $2.50 per unit of capital: and, the output quota is 200 units.Question: Comparing the baseline scenario to the new scenario, how did the new event affect total cost?O Total cost increased.O Total cost decreased.o Total cost remained unchanged.O Cannot be determined Givens:minw + L +r * KL> 0, K 20s.t.% < K L5• The marginal product of labor: MPL = .5*• The marginal product of capital: MPK = .5• Baseline Scenario: w = $10, r = $10 and qo200• New Scenario: w = $10. r= $2.50 and go = 200Equation Description: A firm is attempting to minimize total cost subject to sufficiently employing units of labor and units of capital to produce an output level at least as large as a specified output quota. Totalcost equals the cost to employing units of labor plus the cost to employing units of capital. A firm's production function is the product of two terms: the first term is units of capital raised to the 5 power; and,the second term is units of labor raised to the 5 power. The marginal product of labeterm is units of labor raised to the -5 power. The marginal product of capital equals the product of three terms: the first term is 5; the second term is units of labor raised to the 5 power; the third term is unitsof capital raised to the -5 power. As a baseline scenario: The wage rate is $10 per unit of labor; the rental rate is $10 per unit of capital; and, the output quota is 200 units. As a new scenario: The wage rate isequals the product of three terms: the first term is .5: the second term is units of capital raised to the 5 power; the third$10 per unit of labor; the rental rate is $2.50 per unit of capital; and, the output quota is 200 units.Question: Comparing the baseline scenario to the new scenario, how are capital and labor related?O Capital and labor are inferior.O Capital and labor are complements in production.O Capital and labor are unrelatedO Capital and labor are substitutes in production.O Cannot be determined.

A production function tells the relationship between the output and the inputs used. It shows the…

Givens: min w L+r * K L20, K 0 s.t. 9o SK L • The marginal product of labor: MPL .5 K • The marginal product of capital: MPK = .5 • Baseline Scenario: w = $10, r = $10 and go = 200 • New Scenario: w = $10. r = $2.50 and qo = 200 Equation Description: A firm is attempting to minimize total cost subject to sufficiently employing units of labor and units of capital to produce an output level at least as large as a specified output quota. Total cost equals the cost to employing units of labor plus the cost to employing units of capital. A firm's production function is the product of two terms: the first term is units of capital raised to the .5 power; and, the second term is units of labor raised to the 5 power. The marginal product of labor equals the product of three terms: the hrst term is 5: the second term is units of capital raised to the 5 power; the third term is units of labor raised to the -5 power. The marginal product of capital equals the product of three terms the first term is 5: the second term is units of labor raised to the 5 power; the third term is units of capital raised to the - 5 power. As a baseline scenario: The wage rate is $10 per unit of labor: the rental rate is $10 per unit of capital: and, the output quota is 200 units. As a new scenario: The wage rate is $10 per unit of labor; the rental rate is $2.50 per unit of capital; and, the output quota is 200 units. Question: Comparing the baseline scenario to the new scenario, how did the new event affect total cost? O Total cost increased. O Total cost decreased. O Tolal cost remained unchanged.

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC