EBK ECONOMICS: PRINCIPLES AND POLICY
13th Edition
ISBN: 8220100605932
Author: Blinder
Publisher: Cengage Learning US
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Question
Chapter 7, Problem 4TY
To determine
The long run period of the firm.
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Students have asked these similar questions
Suppose the hourly wage is $20 and the price of each unit of capital is $2. The price of output is constant at $20/unit. The production function and marginal product function, respectively, are shown below.
If the current capital stock is fixed at 2,500 units, how much labor should the firm employ in the short run? Show your work.
Widget factory Inc. in Wisconsin has the following production function: F(L,K)=2L
L represents the number of labours hours. Workers at this factory are paid an hourly wage of $30 and they rent capital at$25/ hour.since this is a competitive market, the factory output is $50 per unit.
Let's pretend the firm operates in the short run with capital fixed at 900, how many workers would widget factory Inc employ? What is their profit rate?
A firm produces good Y with just 2 factors: Capital which is fixed in supply and labour which is variable. Identify the stages of production in the diagram and explain why the firm still hire labour even though it is in the range of diminishing returns.
What is the number of workers after which diminishing marginal returns starts? Is this a short run or long run phenomenon?
Labour (units)
1
2
3
4
5
6
7
8
9
Total Product (TP) in Units
8
15
24
30
35
37
38
38
36
Average Product (AP) in units
8
7.5
8
7.5
7
6.17
5.43
4.75
4
Marginal Product
(MP) in units
8
7
9
6
5
2
1
0
-2
Chapter 7 Solutions
EBK ECONOMICS: PRINCIPLES AND POLICY
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Similar questions
- ECONOMICSarrow_forwarda) Graph the TP, MP and AP data below. Clearly identify the 3 stages of production by drawing dotted lines vertically at the appropriate labor levels (increasing returns, decreasing returns, negative returns). productarrow_forwardThe marginal resource cost of a resource measures the extra cost incurred by one more unit of the resources hired. true or falsearrow_forward
- Suppose the hourly wage is $2 and the price of each unit of capital is $5. The price of output is constant at $20 per unit. The production function is: 1,K f(E, K) = 2 E where K is the capital stock and E is the level of employment. If the current capital stock is fixed at 400 units: (a) How much labor should the firm employ in the short run? (b) How much profit will the firm earn?arrow_forwardQuestion 21.21. Which would be an implicit cost for a firm? The cost of worker wages and salaries for the firm. paid for leasing a building for the firm. paid for production supplies for the firm. of wages foregone by the owner of the firm.arrow_forwardQuestion 16 When is it not in the best interest of a company to hire additional workers in the short run? when the average product of labor is decreasing when the firm is in Stage II of the production process when the marginal revenue product equals zero when the wage rate is equal to or greater than labor's marginal revenue productarrow_forward
- In 2009 General Motors (GM) announced that it would reduce employment by 21,000 workers. What does this decision reveal about how GM viewed its marginal revenue product (MRP) and marginal resource cost (MRC)? Why didn’t GM reduce employment by more than 21,000 workers? By fewer than 21,000 workers?arrow_forwardYou 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?arrow_forwardMaking dresses is a labor-intensive process. Indeed, the production function of a dressmaking firm is well described by the equation Q = L − L2∕800, where Q denotes the number of dresses per week and L is the number of labor hours per week. The firm’s additional cost of hiring an extra hour of labor is about $20 per hour (wage plus fringe benefits). The firm faces the fixed selling price, P = $40. Over the next two years, labor costs are expected to be unchanged, but dress prices are expected to increase to $50. What effect will this have on the firm’s optimal output? A- Increase B- Decrease C- No Effectarrow_forward
- Answer the attached questionarrow_forwardA firm had sales revenue of $942 million last year. It spent $463 million on labor, $88 million on capital and $162 million on materials. The firm's factory sits on land owned by the firm that could be rented out for $2 million per year. What was the firm's economic profit last year in millions of dollars? (Do not include the word "million" or the dollar symbol in your answer, just a number.)arrow_forward(1) Labor Demand Curves are a) more elastic in the short-run than in the long run b) less elastic in the short-run than in the long run c) can be upward or downward sloping depending on the relative sizes of the scale and substitution effects of a wage change d) are less elastic the easier it is for the firm to substitute capital for laborarrow_forward
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