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Ppose chniques 1or ucng 1 shown in ie tabic above. a. Given the resource prices shown, which production technique would the firm use? Why? b. Suppose the firm can sell blankets for $26 each. Would the firm be profitable? c. Assume a new technique is developed that economizes on the relatively expensive labor. It requires 2 units of land, one unit of labor, 3 units of capital, and 1 unit of entrepreneurial ability. Would the firm adopt this new technique? d. Suppose the firm's cost of capital rises to $5, all other values being the same. Which technique would the firm now choose?

Ppose chniques 1or ucng 1 shown in ie tabic above. a. Given the resource prices shown, which production technique would the firm use? Why? b. Suppose the firm can sell blankets for $26 each. Would the firm be profitable? c. Assume a new technique is developed that economizes on the relatively expensive labor. It requires 2 units of land, one unit of labor, 3 units of capital, and 1 unit of entrepreneurial ability. Would the firm adopt this new technique? d. Suppose the firm's cost of capital rises to $5, all other values being the same. Which technique would the firm now choose?

Microeconomics: Private and Public Choice (MindTap Course List)
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter3: Demand, Supply, And The Market Process
Section: Chapter Questions
Problem 11CQ
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Problem 2. The diagram below indicates four flows: one flow of resources, one 1 flow of goods and services, one monetary flow of income payments, and one monetary flow of payments to the sellers of the goods and services. Identify the flows of economic resources, goods and services, and monetary payments between the Household Sector and the Business Sector on the four lines in the diagram below: Goods and services • Wages, rent, interest, and profit income Land, labor, capital, and entrepreneurship Consumer expenditure. Resource Market Businesses Households Product Market
Transcribed Image Text:Problem 2. The diagram below indicates four flows: one flow of resources, one 1 flow of goods and services, one monetary flow of income payments, and one monetary flow of payments to the sellers of the goods and services. Identify the flows of economic resources, goods and services, and monetary payments between the Household Sector and the Business Sector on the four lines in the diagram below: Goods and services • Wages, rent, interest, and profit income Land, labor, capital, and entrepreneurship Consumer expenditure. Resource Market Businesses Households Product Market
ECN 210 Dr. M. Di Liberto Principles of Economics I: Microeconomics Worksheet - Chapter 2 Problem 1 Suppose there are three techniques for producing 1 wool blanket (Techniques 1, 2, and 3), as shown in the table above. а. Given the resource prices shown, which production technique would the firm use? Why? b. Suppose the firm can sell blankets for $26 each. Would the firm be profitable? c. Assume a new technique is developed that economizes on the relatively expensive labor. It requires 2 units of land, one unit of labor, 3 units of capital, and 1 unit of entrepreneurial ability. Would the firm adopt this new technique? d. Suppose the firm's cost of capital rises to $5, all other values being the same. Which technique would the firm now choose? Price per Unit of Resource Resources Required Resource Technique 1 Technique 2 Technique 3 Technique 4 Units Costs Units Costs Units Costs Units Costs Land $2 2 3 Labor $4 2 1 Capital Entrepreneurship $3 $5 1 2 3 1 1 1 1 Total Price per Unit of Resources Required Resource Resource Technique 1 Technique 2 Technique 3 Technique 4 Units Costs Units Costs Units Costs Units Costs Land $2 2 2 2 Labor $4 3 2 1 1 $5 $5 Capital 2 3 3 Entrepreneurship 1 1 1 1 Total
Transcribed Image Text:ECN 210 Dr. M. Di Liberto Principles of Economics I: Microeconomics Worksheet - Chapter 2 Problem 1 Suppose there are three techniques for producing 1 wool blanket (Techniques 1, 2, and 3), as shown in the table above. а. Given the resource prices shown, which production technique would the firm use? Why? b. Suppose the firm can sell blankets for $26 each. Would the firm be profitable? c. Assume a new technique is developed that economizes on the relatively expensive labor. It requires 2 units of land, one unit of labor, 3 units of capital, and 1 unit of entrepreneurial ability. Would the firm adopt this new technique? d. Suppose the firm's cost of capital rises to $5, all other values being the same. Which technique would the firm now choose? Price per Unit of Resource Resources Required Resource Technique 1 Technique 2 Technique 3 Technique 4 Units Costs Units Costs Units Costs Units Costs Land $2 2 3 Labor $4 2 1 Capital Entrepreneurship $3 $5 1 2 3 1 1 1 1 Total Price per Unit of Resources Required Resource Resource Technique 1 Technique 2 Technique 3 Technique 4 Units Costs Units Costs Units Costs Units Costs Land $2 2 2 2 Labor $4 3 2 1 1 $5 $5 Capital 2 3 3 Entrepreneurship 1 1 1 1 Total
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