Variable Input 1 $20 A Variable Input 2 Fixed Input Price $30 $40 Marginal Product B 60 Suppose you are the manager of Super Suds, a large manufacturer of laundry detergent that uses two variable inputs and one input that is fixed in the short-run. Refer to the table above. In the short run, if A = 40 and B = 40, which of the following is true? Select one: OA. You should buy more of Input 1 and less of Input 2. OB. You should buy more of Input 2 and less of Input 1.

Variable Input 1 $20 A Variable Input 2 Fixed Input Price $30 $40 Marginal Product B 60 Suppose you are the manager of Super Suds, a large manufacturer of laundry detergent that uses two variable inputs and one input that is fixed in the short-run. Refer to the table above. In the short run, if A = 40 and B = 40, which of the following is true? Select one: OA. You should buy more of Input 1 and less of Input 2. OB. You should buy more of Input 2 and less of Input 1.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Isocost and Isoprofit Curve Analysis

An isocost curve in the production theory that is a crucial part of economics depicts different combinations of factor inputs at a given market cost. In other words, this shows all the combinations of production factors that cost the same for the firm to employ. Usually, this can be depicted as a downward sloping straight line when the firms act as the price-takers in the factor markets. The slope of this mainly depicts the relative prices of different production factors.

Question

Variable Input 1 Variable Input 2
Fixed Input
$30
$20
$40
Price
A
Marginal Product
60
B
Suppose you are the manager of Super Suds, a large manufacturer of laundry detergent that uses two variable
inputs and one input that is fixed in the short-run.
Refer to the table above. In the short run, if A = 40 and B = 40, which of the following is true?
Select one:
O A. You should buy more of Input 1 and less of Input 2.
O B. You should buy more of Input 2 and less of Input 1.
OC. You should buy less of the Fixed Input.
O D. Your firm is minimizing costs.

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7. You are economic consultant for Jack, who farms raw cotton in a perfectly competitive market. One day he gives you the following data at his present level of production: Output = 2000 pounds, market price = $5.00, total cost =$8000, fixed cost=$2000, marginal cost=$5. The minimum of AVC occurs at {1000 pounds at $2} and the minimum of ATC at {1500 pounds at $3.5}. Please help Jack with the following questions based on the above figures: a. Draw a graph for the raw cotton market and a graph for Jack’s farm current situation that includes MC, ATC, and AVC, labeling all relevant points on axes with numerical values. Is Jack maximizing the profit (minimizing the loss)? Why or why not? Label the total profit/loss area. b. Suppose more farmers enter the raw cotton market until the market price is $3.00 per pound. On the same graphs, show the effect of this change in the market place. Would you like to suggest Jack leaving the market in the short run? Explain your answe
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