Hi,I need help with B.4.Thank you Answer ALL questions in this sectionAssume you can work as many hours you wish at £10 per hour (net of tax). If you donot work you have no income. You have no ability to borrow or lend, so your consumption,c, is simply equal to your income.В.3.В.1.a) A profit-maximising firm faces a downward-sloping demand curve for its output andhas marginal costs that increase with output. Show, on a single diagram, how itsprofit maximisation decision can be represented both in terms of a feasible setoptimisation and its marginal revenue and marginal cost. Why is there a deadweighta) Assume that your optimal choice of consumption and leisure is to work 8 hours perday. Illustrate this choice diagrammatically using the feasible set and indifferencecurves, defined in terms of daily values of consumption c, and "leisure", l= 24 minusloss in this casehours worked.b) Now assume the firın Is à cypical firm in a perfectly competitive market. Show thefirm's optimal choice alongside the market equilibrium, and briefly explain why thereis no deadweight loss in this case.b) Now assume that you receive non-labour income of £70 per week (i.e. irrespective ofhow much you work). Show the impact on your feasible set, and show a new optimalchoice in which consumption increases but labour supply decreases. Explain howsuch a change can be related to the properties of the Marginal Rate of Substitution/´c) Assume an initial equilibrium in which the firın in part b) is making a loss. Explainhow the market and a typical surviving firm will adjust in these circumstances so thatnormal profits will be made. You should illustrate your answer diagrammatically.c) Show that, for a sufficiently large non-labour income, it may be optimal not to workat all. Assuming this is the case, what would be the impact of an increase in yourhourly wageВ.2.В.4.a) Explain why individuals may try to smooth their consumption over their lifetime.Illustrate this concept with a diagram.a) Given a production function relating labour input to output, show diagrammaticallythe impact of an improvement in technology on total output and the average productb) Explain how borrowing constraints can impede the process of consumptionsmoothing. If many households are affected by such constraints, explain how this mayresult in a “Keynesian" consumption function.of labourb) Using a diagram, show how, in a Malthusian model, a one-off improvement intechnology, as in part a), will only have a temporary impact on living standards.c) In a closed economy Keynesian Cross framework show how a decline in investmentwill lead to a fall in income. Explain the role of the consumption function and themultiplier in this process.c) Use tne same diagrammatic framework to explain the role of technologicalimprovements, capital and demographic responses, in the historical experience ofcountries that have escaped from the Malthusian trap ( ^

B.4. a) Given a production function relating labour input to output, show diagrammatically the impact of an improvement in technology on total output and the average product of labour b) Using a diagram, show how, in a Malthusian model, a one-off improvement in technology, as in part a), will only have a temporary impact on living standards. c) Use tne same diagrammatic framework to explain the role of technological improvements, capital and demographic responses, in the historical experience of countries that have escaped from the Malthusian trap

B.4. a) Given a production function relating labour input to output, show diagrammatically the impact of an improvement in technology on total output and the average product of labour b) Using a diagram, show how, in a Malthusian model, a one-off improvement in technology, as in part a), will only have a temporary impact on living standards. c) Use tne same diagrammatic framework to explain the role of technological improvements, capital and demographic responses, in the historical experience of countries that have escaped from the Malthusian trap

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Q1.The following is a Cobb-Douglas production function: Q = 1.75K0.6L0.5. What is correct here? * -This production function displays constant returns to scale -This production function displays increasing returns to scale -A one-percent change in L will cause Q to change by one percent -This production function displays decreasing returns to scale Q2. For studying demand relationships for a proposed new product that no one has ever used before, what would be the best method to use? * -consumer surveys, where potential customers hear about the product and are asked their opinions -double log functional form regression model -ordinary least squares regression on historical data -market experiments, where the price is set differently in two markets
4. For each of the following production functions, write the equation and graph the supply curve of the firm if w=20 and r=50 When the price of output is $20, how much will the firm offer to the market and what are the profits of the firm? a. Q = 10 K^.2L^.5B^.1 in the long-run with capital flexible. B is the amount of Building Space employed, which is held fixed at 1 unit in both the long-run and the short-run and has a price of $100 per unit. b. Q= (4K^.6 + 8L^.6)^ 1.25
Consider a production function for an economy with 2 factors of production L, K: Y=10(KL)1/2 where Y is real output, L is labour, K is capital. In this economy the factors of production are in fixed supply with L = 10, K = 10. What type of returns to scale does this production function exhibit. Demonstrate by example. If the economy is competitive what is the total income that will go to the owners of capital?
Q. Gamma Corporation, one of the firms that retains you as a financial analyst, is considering buying out Beta Corporation, a small manufacturing firm that is now barely operating at a profit. You recommend the buyout because you believe that new management could substantially reduce production costs, and thereby increase profit to a quite attractive level. You collect the following product information in order to convince the CEO at Gamma Corporation that Beta is indeed operating inefficiently: MPL = 10 PL =$20 MPK = 15 PK =$15 Explain how these data provide evidence of inefficiency. How could the new manager of Beta Corporation improve efficiency? Thank you!
5:23 The amount that a firm pays for all of the inputs that go into producing goods and services is the: O average cost. O total revenue. O total price. O total cost.
Set all variables to their baseline values.9) At what level of output is average cost a minimum?10) What is average cost (AC) at that output?11) What is marginal cost (MC) at that output? BASELINE COSTS TC (BASE) $175,113 AC (BASE) $43.78 MC (BASE) $64.12 NEW COSTS TC (NEW) $175,113 AC (NEW) $43.78 MC (NEW) $64.12 POLICY VARIABLES Output 4,000 Fixed cost 25,000 Tax per unit $0.00 AC(NEW)-MC(NEW) -$20.34
Suppose a firm is considering to buy a machine today at $25,000. The use of this machine in the production process of a commodity causes firm`s net incomes to rise by $ 15,000 in each of the next two years. Assume the rate of interest is 10% and machine has no scrap value. Is it desirable for the firm to purchase the machine? Explain your answer.
7. You are the manager of a firm that uses only labor and capital to produce your product. Assume you hire labor and you rent capital equipment in a very competitive market. You pay your employees at a wage rate of $20 per hour and you rent capital at $25 per hour. Assume the marginal product of labor is 50 units of output per hour and the marginal product of capital is 80 units of output per hour. Based on these given information, clearly explain if you should increase, decrease, or leave unchanged the amount of capital used in your production process.
Please only do 4 and 5 not 1 2 or 3 Suppose a firm’s production function is K^1/3 L^2/3 Mpk= L^2/3 / 3K^2/3 MpL=2K^1/3 / 3L^1/3 The rental rate of capital is $52, and the wage rate is $13. What is the cost minimizing capital to labor ratio? How many units of capital and labor should the firm use to produce 1200 units of output How much would it cost the firm to produce 1200 units? What is the short run and long run total costs of decreasing output to 1000 units? Assuming relocation is costless, should the firm relocate to a new location where w=15, r=40?
(a) Complete the following table and draw the corresponding graphs. Capital inputs Labor inputs Total product Average product Marginal product 20 0 0 20 1 15 20 2 34 20 3 51 20 4 65 20 5 74 20 6 80 20 7 80 20 8 75 (b) What is relationship between MP and AP? Explain why MP first rises, then declines and ultimately becomes negative? (c) Whether the above phenomenon is long run or short run and why? (d) Does law of diminishing marginal returns holds in above scenario? Why and why not.
Assume that we are in a long-run environment and a firm employs two groups of workers, medium-skilled and low-skilled (there is no capital used by this firm). Low-skilled workers are paid $7.25 per hour, whereas medium-skilled workers are paid $17. Assume that both groups of workers are normal inputs into the production process and the government increases the minimum wage to $15. Workers in the medium-skilled group are happy because they believe that the firm will increase their work hours now. Are the medium-skilled workers correct in their assessment? Explain why or why not. Do firms respond differently in the long run to a change in the minimum wage if minimum wage workers are considered normal inputs or inferior inputs into the production process? Fully explain your answer.
QUESTION 1a. Is it possible to have diminishing returns to a single factor of production and constant returnsto scale at the same time? Discuss.b. Isoquants can be convex, linear, or L-shaped. What does each of these shapes tell you aboutthe nature of the production function? What does each of these shapes tell you about theMRTS?QUESTION 2a. A firm faces the following average revenue (demand) curve:P = 120 − 0.02Qwhere Q is weekly production and P is price, measured in cents per unit. The firm’s costfunction is given by C = 60Q + 25,000. Assume that the firm maximizes profits.i. What is the level of production, price, and total profit per week?ii. If the government decides to levy a tax of 14 cents per unit on this product, what will be thenew level of production, price, and profit?b. The United States currently imports all of its coffee. The annual demand for coffee by U.S.consumers is given by the demand curve Q = 250 – 10P, where Q is quantity (in millions ofpounds) and P is the…