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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Chapter 7, Problem 2.8P
(a)
To determine
The changes in the marginal product of labor.
(b)
To determine
The changes in marginal product of labor.
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Following is information on the production levels of three different firms. Firm A is currentlyproducing at a quantity where it is experiencing increasing returns. Firm B is currentlyproducing at a quantity where it is experiencing diminishing returns. Firm C is currentlyproducing at a quantity where it is experiencing negative returns.a. If each of the firms cut back on its labor force, what will happen to its marginalproduct of labor? And why?b. If each of the firms adds to its labor force, what will happen to its marginal product oflabor? And why?
A country can produce two goods, X and Y. The maximum possible output
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Chapter 7 Solutions
Principles of Economics (12th Edition)
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- Suppose you are considering hiring another worker. Also assume that you are at a firm that is operating at a point where the marginal product of labor is 5 and the price of each unit of labor is $2, and the marginal product of capital is 20 and the price of each unit of capital is $10. Should you hire another worker? If you hire another worker, what will happen to the marginal product of labor and why?arrow_forwardWhat is the technological difference between straight line and strictly concave production curves? Show and explain.arrow_forwardProducer Theory A firm has the following Production Function: Q=3K²L² and w=P₁= $10 r=P = $90 a) If the profit maximizing firm is committed to producing output Q = 6300 units at least cost, what are the optimal amounts of capital and labour the firm should employ? Illustrate your answerarrow_forward
- Table 18-8 The following table shows the production function for a particular business. The numbers represent the various labor and output combinations the firm may choose for its output on a daily basis. Labor Output 0 0 70 130 180 220 250 123 4 5 Refer to Table 18-8. Suppose this firm charges a price of $5 per unit of output and pays workers a wage equal to $160 per day. How many workers should this firm hire to maximize its profit? 2 workers 3 workers 4 workers 5 workersarrow_forwardAssume that you are studying an economy which produces two goods, x and y, using two factors of production, capital K and labour L. The economy’s overall quantities of the two factors are given, and the capital intensity (the capital-to-labour ratio) in the production of y is always higher than the capital intensity in the production of x. At present there is an excess supply of y. Explain and illustrate graphically what will happen in the long run to:1) Prices of goods and production.2) factor prices and factor use intensities in each sector.arrow_forwardSolve it all on paper!arrow_forward
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