units(5) * 01 20. For the diagram above, the movement from point A to point B to point C can best be explained by which of the following factors? O A decrease in demand, followed by the entry of new firms, and an expansion in supply in a constant cost industry An increase in demand, followed by the entry of new firms, and an expansion of supply in an increasing cost industry A decrease in demand, followed by the exit of firms, and a decline in supply in an increasing cost industry An increase in demand. Followed by the exit of firms, and a decline in supply in a constant cost industry None of the above can adequately explain the movement

units(5) * 01 20. For the diagram above, the movement from point A to point B to point C can best be explained by which of the following factors? O A decrease in demand, followed by the entry of new firms, and an expansion in supply in a constant cost industry An increase in demand, followed by the entry of new firms, and an expansion of supply in an increasing cost industry A decrease in demand, followed by the exit of firms, and a decline in supply in an increasing cost industry An increase in demand. Followed by the exit of firms, and a decline in supply in a constant cost industry None of the above can adequately explain the movement

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2. A firm has a production function given by the following table: Units of Labor 1 2 3 4 5 K=1 3 15 K=2 10 K=3 16 K=4 20 25 28 30 31 (i) Suppose that K is fixed at 2. Does this production function exhibit diminishing marginal returns? (ii) Does this production function exhibit constant returns to scale for all values of K and L? 8 15 21 12 19 25 22 28 17 24 30
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3. (14 points) Let the production function be Q(K,L)=2K L. The cost of one unit of labor is w, the cost of one unit of capital is r, and the quanitity to produce is y. (a) (4 points) Set up the firm's cost-minimization problem, and clearly write down the con- Page 6 straint the firm faces. The cost minimization problem of the firm is min(KL) WL+rK. The constraint: y=2K!L!. anscribed Text (b) (5 points) What are two conditions that the optimal bundle L and K need to satisfy? Write down their expressions. Tangency: -=-; production: y = 2(K)! (L)!. (c) (5 points) Solve for the optimal bundle of L. and K that minimizes the firm's cost at y=144 by finding L and K", assuming that w $16 and r $81. By solving the system of two conditions in Part (b), it should be not that hard to get L = 162 and K* = 32.
Refer to Figure 13-7. When does the firm experience diseconomies of scale? a. if it changes its level of output from Q1 to Q2 b. if it changes its level of output from Q2 to Q3 c. if it changes its level of output from Q3 to Q4 d. if it changes its level of output from Q4 to Q5
2. A firm has a production function given by the following table: Units of Labor 1 2 3 4 5 K=1 3 8 12 15 17 K=2 10 15 19 22 24 K=3 16 21 25 28 30 K=4 20 25 28 30 31 (1) Suppose that K is fixed at 2. Does this production function exhibit diminishing marginal returns? (ii) Does this production function exhibit constant returns to scale for all values of K and L?
A firm's production function takes the form: Q(L, K) = min{2L, 3K}, where Q represents output and L and K represent labour and capital, respectively and where w and r give the prices of labour and capital. Assuming no other costs, what would be the marginal cost if the firm increased output by 1 unit? O O MC = Q [ 12/2₁ = Q ( + 1/2 + 1/2 ) MC = W 3r 3w+2r 3w+2r + O MC=3w+2r O W r = 21/1/2+1/1/3/2 O MC =2w+3r MC=1/2
Question 9 □ Which of the following best explains why adding more of a variable input will eventually lead to smaller increases in output in the short run? Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer. a b C d Owners will run out of good variable inputs to use. There will be less of the fixed input per variable input as more of a variable input is used. There will be less of the fixed input as more of the variable input is used. The amount of the variable input will decrease as more of it is used.
The following is a table of cost for a toy manufacturing firm. The variable input is labor. Use this table to answer the following question. Average variable Average fixed cost Average Variable Quantity of toys Total costs cost total cost costs $0 $20 $10 A $40 В In the cell B, which number is correct? 10 O 5 none of these options is correct O 15
Bob produces candles. The average total cost reaches its minimum at a quantity O A. the same as the quantity at which the average variable cost reaches its minimum. O B. lower than the quantity at which the average variable cost reaches its minimum. O C. the same as the quantity at which the marginal cost is at a maximum. O D. the same as the quantity at which the marginal cost is at a minimum. O E. greater than the quantity at which the average variable cost reaches its minimum.
The profit (in dollars) from the sale of x lawn mowers is II(x) = 70 x -0.07 x2 - 750. The correct interpretation of the marginal average profit of producing 40 mowers is Select one: O a. Can not tell. O b.At production level of 40 mowers a unit increase in production will increase the total profit by $0.40 per mower. O c. At production level of 40 mowers the average profit is increasing at a rate of $0.40 per mower. O d. At production level of 40 mowers the average profit is $0.40 per mower.
Let's assume that a firm produces 60 products. Its total weekly cost (TC) at this output is $2,100. This includes TVC and TFC. We also know that the firm employs 3 part- time workers at a wage cost of $600 per worker per week. This is the firm's only variable cost (TVC). What is the firm's average fixed cost (AFC) at this output? O $2.50. O $2. O $5. O $100. O $10. Let's assume that a firm's total weekly costs are as follows: 1. Salaries of hired workers $5,000. 2. Supplies = $1,000. 3. Rent = $600, 4. The owners have invested a certain amount of their own money into the business. This could have earned them interest of $200 per week if they had chosen to put it into a bank instead of investing it into their business. 5. The value of the owner's time is estimated to be $800 per week. What are the firm's total economic costs? O $6.000 O $7.600. O $900. $7.500. O $6.700.
A firm has a fixed production cost of $1,000 and a constant marginal cost of production of $700 per unit produced. What is the firm's total cost function? O A. TC = 1,000 + (700q) O B. TC = 1,000 + (700q). OC. TC = 700q. O D. TC = 1,000. The firm's average total cost (ATC) of production is O A. ATC = 1,000 + (700q). OB. 1,000 + (700q) ATC = Oc. 1,000 ATC = O D. ATC = 700q. O E. ATC = 700. If the firm wanted to minimize the average total cost, would it choose to be very large or very small? Explain. OA. very small because the average total cost of production rises with output. O B.- very large because the average variable cost of production falls with output. OC. very small because the average fixed cost of production rises with output. O D. very small because the total cost of production rises with output. O E. very large because the average total cost of production falls with output.