To ascertain: The industry or industriesthat appears to display decreasing returns to scale.

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Answer 1

Question

Chapter 7, Problem 8E

a)

To determine

To ascertain:The industry or industriesthat appears to display decreasing returns to scale.

b)

To determine

To ascertain:The industry that appears to display constant returns to scale.

c)

To determine

To ascertain: The industry that with a given percentage increase in capital that would result in the largest percentage increase in output.

d)

To determine

To ascertain:Theindustry that would result in the largest percentage increase in output; given the percentage increase in production workers.

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Q2. The economist for the ABC Truck Manufacturing Corporation has calculated a production function for the manufacture of their medium-size trucks as follows: Q = 1.3*(L^0.75)*(K^0.3) Where Q is the number of trucks produced per week, L is the number of labor hours per day and K is the daily usage of capital investment. 1. Does the equation exhibit increasing, constant or decreasing returns to scale? Why? 2. Calculate the marginal product of labor and marginal product of capital using the below data? 3. How many trucks will be produced per week with the following amounts of labor and capital? Labor Capital 100 50 120 60 150 75 200 100 300 150

13

A firm's production function is given by y(K, L) = 2√(KL) or 2(KL).5 (2 times the square root of the product of K and L), where K is the number of machines used and L is the number of labor hours.A) Does this production process exhibit increasing, constant or decreasing returns to scale? (Hint: You MUST compare y(2K, 2L) to 2*y(K, L)... do NOT compare any other proportional increase!).B) Holding the number of machines constant at 4, is the marginal product of labor increasing, constant or decreasing as more labor is used? (Hint: You MUST construct a table of L, TP, and MP for 0 through 4 workers).Insert work for both A and B.

Answer 2

Question

Chapter 7, Problem 8E

a)

To determine

To ascertain:The industry or industriesthat appears to display decreasing returns to scale.

b)

To determine

To ascertain:The industry that appears to display constant returns to scale.

c)

To determine

To ascertain: The industry that with a given percentage increase in capital that would result in the largest percentage increase in output.

d)

To determine

To ascertain:Theindustry that would result in the largest percentage increase in output; given the percentage increase in production workers.

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Answer 3

Question

Chapter 7, Problem 8E

a)

To determine

To ascertain:The industry or industriesthat appears to display decreasing returns to scale.

b)

To determine

To ascertain:The industry that appears to display constant returns to scale.

c)

To determine

To ascertain: The industry that with a given percentage increase in capital that would result in the largest percentage increase in output.

d)

To determine

To ascertain:Theindustry that would result in the largest percentage increase in output; given the percentage increase in production workers.

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Answer 4

Question

Chapter 7, Problem 8E

a)

To determine

To ascertain:The industry or industriesthat appears to display decreasing returns to scale.

b)

To determine

To ascertain:The industry that appears to display constant returns to scale.

c)

To determine

To ascertain: The industry that with a given percentage increase in capital that would result in the largest percentage increase in output.

d)

To determine

To ascertain:Theindustry that would result in the largest percentage increase in output; given the percentage increase in production workers.

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Answer 5

Chapter 7, Problem 8E

a)

To determine

To ascertain:The industry or industriesthat appears to display decreasing returns to scale.

b)

To determine

To ascertain:The industry that appears to display constant returns to scale.

c)

To determine

To ascertain: The industry that with a given percentage increase in capital that would result in the largest percentage increase in output.

d)

To determine

To ascertain:Theindustry that would result in the largest percentage increase in output; given the percentage increase in production workers.

Answer 6

Chapter 7, Problem 8E

a)

To determine

To ascertain:The industry or industriesthat appears to display decreasing returns to scale.

Answer 7

Chapter 7, Problem 8E

a)

To determine

To ascertain:The industry or industriesthat appears to display decreasing returns to scale.

Answer 8

b)

To determine

To ascertain:The industry that appears to display constant returns to scale.

Answer 9

b)

To determine

To ascertain:The industry that appears to display constant returns to scale.

Answer 10

c)

To determine

To ascertain: The industry that with a given percentage increase in capital that would result in the largest percentage increase in output.

Answer 11

c)

To determine

To ascertain: The industry that with a given percentage increase in capital that would result in the largest percentage increase in output.

Answer 12

d)

To determine

To ascertain:Theindustry that would result in the largest percentage increase in output; given the percentage increase in production workers.

Answer 13

d)

To determine

To ascertain:Theindustry that would result in the largest percentage increase in output; given the percentage increase in production workers.

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 7 - Prob. 1E Ch. 7 - Prob. 2E Ch. 7 - Prob. 3E Ch. 7 - Prob. 4E Ch. 7 - Prob. 5E Ch. 7 - Prob. 6E Ch. 7 - Prob. 7E Ch. 7 - Prob. 8E Ch. 7 - Prob. 9E Ch. 7 - Prob. 10E

To ascertain: The industry or industriesthat appears to display decreasing returns to scale.

Solution Summary: The author explains that decreasing returns to scale occur when increase in output is less than increase of inputs, such as employment of unskilled labor or traditional methods of production.

To ascertain:The industry or industriesthat appears to display decreasing returns to scale.

To ascertain:The industry that appears to display constant returns to scale.

To ascertain: The industry that with a given percentage increase in capital that would result in the largest percentage increase in output.

To ascertain:Theindustry that would result in the largest percentage increase in output; given the percentage increase in production workers.

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Chapter 7 Solutions