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 3.2P
To determine
Alternative combination of capital and labor.
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At Dana's dairy farm, the average total cost of producing 19 liters of milk is $10, while the average total cost of producing 20 liters
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You are an employer seeking to fill a vacant position on an assembly line. Are you more concerned with the average product of labor or the marginal product of labor for the last person hired?
Aaron has been spending five nights studying for his math tests and his current grade in the course is 90 percent.
He decides to take a part-time job and study only four nights for his next test.
As a result, after his next test, his grade falls to 70 percent.
What is Aaron's marginal cost of working one night a week?
Aaron's marginal cost of working one night a week is
OA. 20 percentage points
OB. greater than 70 percentage points and less than 90 percentage points
OC. 70 percentage points
OD. 90 percentage points
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Principles of Economics (12th Edition)
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- An Engineer earns $200 an hour in her profession. She can hire a Housekeeper for $15 an hour to take care of her home. The Engineer is very smart and hard working. She has found out that she can do the Housekeeping work twice as fast as her Housekeeper. Should she fire the Housekeeper and do the work herself? What principle in Economics should be used in answering this question?arrow_forwardExplain the implicit costs associated with pursuing an MBA. Which do you think are greater for a typical student – the implicit or explicit costs? What does this depend on? Some people consider implicit costs less important than explicit costs because no money is actually exchanged when an organization or individual incurs an implicit cost. Do you think this is accurate? Explain why or why not.arrow_forwardIf the marginal product per dollar spent on capital is more than the marginal product per dollar spent on labor, then in order to minimize costs the firm should use a) less capital and more labor b) less labor and more capital C) less labor and less capital d) more labor and more capitalarrow_forward
- A small company that shovels sidewalks and driveways has 100 homes signed up for its services this winter. It can use various combinations of capital and labor: intensive labor with hand shovels, less labor with snow blowers, and still less labor with a pickup truck that has a snowplow on front. To summarize, the method choices are: Method 1: 50 units of labor, 10 units of capital Method 2: 20 units of labor, 40 units of capital Method 3: 10 units of labor, 70 units of capital Question If hiring labor for the winter costs $100/unit and a unit of capital costs $400, what is the best production method? What method should the company use if the cost of labor rises to $200/unit?arrow_forwardDiscuss Factor Abundance, and Economies of Scale In detail.arrow_forwardWhat is the difference between the labor intensive production and capital intensive production approach.arrow_forward
- Tori is comparing two job offers at engineering and construction firms. One is in Atlanta at a starting salary of $40,000, and the other in Minneapolis at a starting salary of $43,000. Tori looks up the cost-of-living index (COLI) for each city and finds the following information: Atlanta’s COLI is 95.6 (costs are 95.6% of the national average). Minneapolis’s COLI is 111 (costs are 111% of the national average). Are the two salary offers comparable?arrow_forwardResource specialization and division of labor cause the marginal product of labor to increase, but only for a time. Group of answer choices True Falsearrow_forwardWhich of these production functions have diminishing marginal returns to labor? a)F(K,L) = 2K+15L b)F(K,L)=√KL c) F(K,L) = 2√K+15√Larrow_forward
- 4. Ikea Inc., a home remodeling business. The number of square feet they can remodel in a day is described by the Cobb-Douglas production function Q= F (L,K)= 4K"L* where I. is their number of workers and K is units of capital. The wage rate is $5 a day, and a unit of capital costs $20 a day. What is their minimum cost input combination for remodeling (Q=200) 200 square feet a day? What is the total minimum cost level?arrow_forwardSubmit Estella decides to set up a lemonade stand on a hot summer day. Before long, Estella's friends all decide they would like to help. The table below shows what happens to the number of glasses of lemonade Estella and her friends can make in an hour. Instructions: Round your answers to 1 decimal places. If you are entering a negative number include a minus sign. Lemonade Stand's Labor and Production Levels Labor (workers) Total Average Product Marginal Product Product 1 (Estella) 13 22 es 3 27 4 28 24 a. Complete the average product and marginal product columns in the table above. b. How many additional glasses of lemonade can Estella produce if she has one friend help her make lemonade instead of making lemonade by herself? glasses c. How many additional glasses of lemonade can Estella produce if she has four friends help her rather than having three friends help her? glasses d. If Estella has four friends help her, on average how many glasses of lemonade can her and her friends…arrow_forwardLabel each of the following as sunk cost, opportunity cost, or incremental costs and briefly explain why: (Chapter 2) You are deciding which car to buy. Car A is $24,000 and car B is $32,000. The difference in price is $8,000. What kind of cost does this represent? Answer: Your company invested $300,000 into a study to determine the feasibility of introducing a new product line into the business. The study recommended 2 mutually exclusive feasible alternatives. What kind of cost does the $300K represent? Answer: You have 2 alternatives for a $10,000 investment. Investment A provides a $500 return and investment B provides a $700 return. If you choose Alternative B, what does the $500 return from Alternative A represent? Answer:arrow_forward
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