Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 12, Problem 2.2P
(a)
To determine
The number of workers hired.
(b)
To determine
The number of workers hired.
(c)
To determine
The number of workers hired.
(d)
To determine
The allocation of resources.
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Students have asked these similar questions
Consider the following production function for shirts: q = v6 L3/4K/4, where L is worker-hours, and K is sewing
machine-hours.
a. Compute the marginal products of labor and capital, the average product of labor, and the marginal rate of
technical substitution of labor for capital (i.e. how many units of capital are needed to make up for the loss
of one unit of labor)?
b. Are there diminishing returns to labor (that is, does the marginal product of labor decrease when labor L
increases)? What about to capital?
Is there diminishing marginal rate of technical substitution (MRTS)?
с.
Suppose that you are starting up a lawn-raking business. All of your workers are required to supply their own rakes, so the only cost to you is hiring
labor at an hourty rate. Suppose that the market price of raking someone's yard is $50 per lawn and the hourly wage is $25 per hour. The following
graph shows the production function (PF) for your business.
On the following graph, use the green line (triangle symbol) to plot the daily isoprofit curve that indicates the profit-maximizing level of output. (Hint:
Derive the slope of the isoprofit curve and then move the curve up or down until it's in the position you warnt; this is because you do not know the
amount of profit that will yield the desired curve.) Then use the black point (plus symbol) to indicate the profit-maximizing level of labor and output
per day.
Note: You will not be graded on any adjustments made to the graph.
100
90
Isoprofit
30
Profit Max
40
FF
20
LABOR Hours per day
LAWNS RAKED PER DAY
Maximizing profit with isoprofit curvesSuppose that you are starting up a lawn-raking business. All of your workers are required to supply their own rakes, so the only cost to you is hiring labor at an hourly rate. Suppose that the market price of raking someone's yard is $24 per lawn and the hourly wage is $18 per hour. The following graph shows the production function (PF) for your business.
Chapter 12 Solutions
Principles of Economics (12th Edition)
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