**Optimization in Competitive Markets****Problem 1: Labor Hiring Decision of a Profit-Maximizing Firm**A profit-maximizing firm in a competitive market makes the following profit:\[ \pi = \frac{p}{2w + v} \]where $ p $ is the price for the firm's output and $ w $ and $ v $ are the costs of labor and capital, respectively. How much labor does the firm hire?**Options:**a. $ 2p $b. $ \frac{2p}{(2w+v)^2} $c. $ \frac{p}{w} $d. $ \frac{1}{2w+v} $**Solution:**Option (b): $ \frac{2p}{(2w+v)^2} $---**Problem 2: Consumption Behavior with Giffen Goods**Celeste only consumes apples and oranges, and apples are a Giffen good for her. If her income increases by 1%, how does her consumption of oranges change?**Options:**a. Decreasesb. Increases by 1%c. Increases more than 1%d. Increases less than 1%**Solution:**Option (c): Increases more than 1%---*Explanation:*- **Giffen Goods:** A Giffen good is an inferior good for which an increase in its price leads to an increase in its quantity demanded, due to the stronger income effect overpowering the substitution effect.- **Income Effect:** Represents how a change in income affects the quantity demanded of a good.- **Substitution Effect:** Occurs when a good's price rises and consumers switch to cheaper alternatives.In the case of Celeste, if apples are a Giffen good and her income increases, she will allocate more towards oranges (a normal good) leading to a substantial increase in her consumption of oranges, as indicated by option (c).

1) Where, p is the firm's output price, w is the costs of labor and v is the cost of capital. Now,…

where p is thế pri 2w+v A profit-maximizing firm in a competitive market makes the following profit, = firm's output and w and v are the costs of labor and capital, respectively. How much labor does the firm hire? O a. 2p 2p (2w+v Ob. O c. Od. 2w+v Clear my choice Celeste only consumes apples and oranges, and apples are a Giffen good for her. If her income increases by 1%, how does her consumption of oranges change? Decreases O b. Increases 1% Increases more than 1% O d. Increases less than 1% Clear my choice

where p is thế pri 2w+v A profit-maximizing firm in a competitive market makes the following profit, = firm's output and w and v are the costs of labor and capital, respectively. How much labor does the firm hire? O a. 2p 2p (2w+v Ob. O c. Od. 2w+v Clear my choice Celeste only consumes apples and oranges, and apples are a Giffen good for her. If her income increases by 1%, how does her consumption of oranges change? Decreases O b. Increases 1% Increases more than 1% O d. Increases less than 1% Clear my choice

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

The table below shows a firm that is perfectly competitive in both the labor and product markets, showing how much daily output a firm can produce using various numbers of workers. Number of Workers 1 2 3 4 5 6 Output O $2 O $460 O $115 O $100 O $40 3 9 16 21 23 24 If output sells for $20/unit, what is the marginal revenue product of the 5th worker?
An increase in the average wage also causes the labor demand curve to shift to the O A. left because the use of machines decreases, causing the average wage to increase. B. right because the use of machines increases, causing labor to become more productive. C. left because the use of machines decreases, causing the marginal cost of labor to increase. O D. left because the use of machines decreases, causing labor to become less productive. O E. right because the use of machines decreases, causing the marginal product of labor to increase.
The slope of an isocost line is equal to the Select one: O a. O b. and is negative of the ratio of input prices; constant decreases as we move down the line; the ratio of the marginal products O c. is constant; the ratio of the marginal products O d. increases as we move down the line; the ratio of input prices
When a firm produces one unit, the variable cost is $7. When the firm produces two units, the variable cost is $10. When the firm produces three units, the variable cost is $12. What is the marginal cost associated with three units of production? Select one: O a. 3 O b. 7 O c. 2 O d. 0
Total Output Per Day Price of Good 10 $ 15 14 14 19 13 23 12 6 27 11 7 31 10 A firm's labor input, total output of labor, and product price schedules are given in the table. Labor is the only variable input. How many workers will the profit-maximizing firm hire if the wage rate is $15 per day? Multiple Choice O 6 O Units of Labor. 2 3 4 5 F
Consider a competitive, price-taking firm that employs only one variable input,labor, to produce a product that sells for $14 per unit. The wage rate is $24 per unitof labor and total fixed costs are $500. Fill in the blanks in each column of thistable as instructed by the questions below a-Fill in the blanks in columns 3 and 5. Marginal product begins to diminishbeyond ________ units of labor. Marginal product is negative for the _____thunit of labor. [Note: You will see later in this problem that the profitmaximizinglevel of labor usage does indeed occur well in the range ofdiminishing marginal product, but not into the range of negative marginalproduct. b- Compute marginal and average revenue products and fill in the blanks incolumns 4 and 6. The sixth unit of labor __________________ (increases,decreases) _______________ (total, marginal) revenue by $__________.Decreasing labor usage from three to two units _______________ (increases,decreases) _______________ (total, marginal)…
A firm's production function is Q = 100L.0 K-4. The firm's input prices are PL = $40 and PK = $30. The firm wishes to produce Q = 3,000 units of output and minimize the cost of production. How much labor (L) should the firm employ? O A. L=20.96. O B. L=31.45. O C. L=34.26. O D. L=38.45. O E. L=41.22. QUESTION 2 A firm estimates its production function as Q = -2.4 + 20*L -.5*L2 + 30*K -1.00*K2 + 15*F -.3*F2. Total cost is TC = $2*L + $2.5*K + $1.75*F. The firm wishes to produce 400 units of output. Use Excel to find the cost minimizing amounts of L, K and F. How much F (Fuel) should the firm use? O A. F=7.90. O B. F=9.58. O C. F=10.75. O D. F=12.63. O E. F=14.88.
If a decrease in the price of capital results in increased demand for capital and a proportional increase in the demand for labour, then capital and labour are best described as O A perfect substitutes. O B. gross complements. O C. complements in production. O D. gross substitutes.
The demand for labor curve of nurses shifts rightward if the O A. supply of labor curve for nurses shifts rightward. O B. value of marginal product of nurses increases. OC. wage rate paid to nurses rises. O D. supply of labor curve for nurses shifts leftward. O E. wage rate paid to nurses falls.
4. Given the following graph, briefly respond to the questions appearing directly below this graph. Сapital A 14 10 3. Isoquant for Output = 60 C %3D 3. Isoquant for E/Output = 40 %3D 2 3 9 11 Labor a. For an output level of 40 units, calculate the marginal rate of technical substitution between points A and B. b. Also for an output level of 40 units, calculate the marginal rate of technical substitution be- tween points D and E.
In the United States, labor earnings are about what percent of total income? O a. 75 percent O b. 70 percent O c. 67 percent O d. 50 percent Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.
Firms typically experience decreasing marginal returns to labor at Select one: O A. low; congestion OB. low; specialization OC. high; specialization O D. high; congestion levels of employment due to