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?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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

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b. The Yorkshire Cricket Company makes cricket bats out of lumber supplied to it by Acme Sporting Goods, which pays Yorkshire £10 for each finished bat. Yorkshire's only factors of production are lathe operators and a small building with a lathe. The number of bats per day it produces depends on the number of employee-hours per day, as shown in the table below. Number of bats per day 0 5 10 15 20 25 30 35 Number of employee-hours per day 0 1 2 4 7 11 16 22 (i) If the wage is £15 per hour and Yorkshire's daily fixed cost for the lathe and building is £60, what is the profit-maximising quantity of bats? (ii) What would be the profit-maximising number of bats if the firm's fixed cost were not £60 per day but only £30? (iii) How would Yorkshire's profit-maximising level of output be affected if the government imposed a tax of £10 per day on the company? (Hint: This tax independent from the production level.) (iv) What would Yorkshire's profit-maximising level of output be if the government…
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