ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337408059
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 7, Problem 9P
To determine
To determine:
The values of
Concept Introduction:
Average variable cost (avc) = total variable cost (tvc)/quantity
Average total cost (atc) = total cost (tc)/quantity
Marginal cost (mc) =change in total cost/change in quantity
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Microeconomics - Production FunctionA firm produces shoes using labor (L) and machinery (K) as factors of production. Its production function is Q = K1/3 * L2/3. Answer:(a) is the marginal product of labor (MPL) decreasing?b) is the average product of labor (APL) decreasing?c) what is the relationship between the average product (AP) and marginal product (MP) curves?d) what type of returns to scale does Q exhibit?
None
1. Suppose a chair manufacturer is producing in the short run (with its existing plant
and equipment). The manufacturer has observed the following levels of production
corresponding to different numbers of workers:
NUMBER OF WORKERS NUMBER OF CHAIRS
10
2
18
3.
24
4
28
5.
30
28
6.
7
25
a. Calculate the marginal and average product of labor for this production function.
b. Does this production function exhibit diminishing returns to labor?
c. Explain intuitively what might cause the marginal product of labor to become
negative.
Chapter 7 Solutions
ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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- The accompanying table shows the total daily output for a firm producing specialty cakes and operating with a fixed amount of capital. The cost of labour is $200 per unit per day and the fixed cost of the capital is $1500 per day. Click the icon to view the table. 24 28 8 12 16 20 Complete the last four columns of the table. Units of Labour Total Output (per day) (per day) 4 200 24 2450 28 2510 500 1200 1950 2330 2450 $ 1500 2510 $ 4800 $ 1500 $ 5600 TFC TVC $6300 $ 7100 TC MC $ 2.67 $ 1.14 $ 1.07 $ 2.11 $6.67 $ 13.33 AFC $7.5 $3 $ 1.25 $ 0.77 $ 0.64 $ 0.61 AVC $4 $3.2 $2 $ 1.64 $ 1.72 $ 1.96 ATC $ 11.5 $6.2 $ 3.25 $ 2.41 $ 2.36 $ 2.57 $ 2.23 $0.6 (Round your responses to the nearest cent.) b. Assuming that labour is only hired in increments of 4 units, what is this firm's capacity level of output? per day $ 2.83arrow_forwardQUESTION 3 ABC Manufacturing Company Limited recently hired you to estimate the firm’s production function. Based on your research you have derived the following production function, F(K, L) = KL2. Assuming That capital is fixed at 1 unit, answer the following: a. Calculate the average product of labour when 9 units of labour are utilised b. Calculate the marginal product of labour when 9 units of labour are utilised. (HINT: Recall Marginal requires differential) c. Assuming that capital is no longer fixed and that the price of capital is $10, and the price of Labour is $15. What combination of capital and labour minimizes the cost of producing any Given output?arrow_forward13. Suppose you have a production technology given by f(x1, x2) = min{2x1, x2} and you are producing at the point where a1 = 10 and x2 = 20. what we mean (generally) by the 'marginal product' of an input in (a production.arrow_forward
- The table below shows the weekly relationship between output and number of workers for a factory with a fixed size of plant. P= 10$: w=100$ a) Calculate the marginal product of labor. b) At what point does diminishing returns set in? C) Calculate the average product of labor. D) Find out optimum level of variable input usagearrow_forwardTable: Production Function for Soybeans Quantity of labor (workers) Quantity of soybeans (bushels) 1 25 45 3 60 4 70 75 Look at the table Production Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The total cost of producing 70 bushels of soybeans is: None of these options is correct. $1,024. $550. $250. $400.arrow_forwardWhat is the total cost when the marginal product of labor is 15? What is the total variable cost when the marginal product of labor is equal to 12?arrow_forward
- 8arrow_forwardPaper:Mate: gorlain 15. A company is planning to manufacture mountain bikes. The fixed monthly cost will be $100,000 and it will cost $100 to produce each bicycle. Write the cost function, C, of producing x mountain bikes. а. b. Write the average cost function, C, of producing x mountain bikes. Find C(500), Č(4000). c. d. What is the horizontal asymptote for the graph of the average cost function, C? Describe what this means in practical terms. МАТ 171 Section 2.6 Lab Page 2 of 4arrow_forward3. The "Sad Student" Company finds that it costs a total of C(q) = 9720 +500q – 1.5q +0.005q Dollars to produce q lots of its latest board game named "Calculus Teacher Shooter", each lot consisting of 100 games. A) Analyze the behavior of cost function Interpret the constant term in the expression of C(q) B)arrow_forward
- Question 9 Pepsi uses two inputs to produce soda: bottling machines K and workers L. The machine costs $1000 per day to run and each worker is paid $200 per day. At the current level of production, the marginal product of a machine is an additional 200 cases of soda per day and the marginal product of a worker is an additional 50 cases per day. Is this firm minimizing cost? If not, explain how it should adjust its input usage.arrow_forwardWe can describe inputs as either fixed or variable. Thinking about a company that assembles cars, which of the following would be an example of a fixed input that could not be changed in the short run? Group of answer choices A)The robots that help assemble the cars. B)The building where the assembly takes place. C)The electricity required to support the assembly activity. D)The employees that work for the company.arrow_forwardA production process uses two inputs, labor and capital. If the marginal product of labor per dollar is higher than the marginal product of capital dollar, what should the firm do to lower costs? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Increase output b Decrease output C Increase the amount of capital d Increase the amount of laborarrow_forward
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