Uncertain how to solve correctly Cho makes sweaters in her home. Starting with just some knitting needles and yarn, she was ableto knit 70 sweaters per year. Now some local stores have expressed interest in her designs andoffered to buy her sweaters for $10 each. This makes it worthwhile for her to invest in somecapital; in particular, she could produce many more sweaters if she invested in one or more looms,as shown in the following table. Assume that Cho's sweater business is a perfectly competitivefirm.Complete the following table by calculating the marginal physical product (MPP) of each loom andthe marginal revenue product (MRP) of each loom.Quantity of Input(Looms)0UAWNHI12345Output(Sweaters per year)70130181226265301MPP of Each Loom MRP of Each Loom(Sweaters)(Dollars)If the rental price of a loom is $375 per year, Cho should useSuppose the demand for sweaters is very elastic, while the demand for cigarettes is very inelastic.Suppose that looms are used exclusively in the production of sweaters and that tobacco is usedexclusively in the production of cigarettes. Which of the following might we expect?The demand for looms would be more elastic than the demand for tobacco.The demand for looms would be less elastic than the demand for tobacco.The supply of looms would be less elastic than the supply of tobacco.The supply of looms would be more elastic than the supply of tobacco.

Marginal Price Product (MPP) refers to the change in the total revenue a firm receives when it…

Cho makes sweaters in her home. Starting with just some knitting needles and yarn, she was able to knit 70 sweaters per year. Now some local stores have expressed interest in her designs and offered to buy her sweaters for $10 each. This makes it worthwhile for her to invest in some capital; in particular, she could produce many more sweaters if she invested in one or more looms, as shown in the following table. Assume that Cho's sweater business is a perfectly competitive firm. Complete the following table by calculating the marginal physical product (MPP) of each loom and the marginal revenue product (MRP) of each loom. Quantity of Input (Looms) 812345 0 Output (Sweaters per year) 70 130 181 226 265 301 MPP of Each Loom MRP of Each Loom (Sweaters) (Dollars) If the rental price of a loom is $375 per year, Cho should use Suppose the demand for sweaters is very elastic, while the demand for cigarettes is very inelastic. Suppose that looms are used exclusively in the production of sweaters and that tobacco is used exclusively in the production of cigarettes. Which of the following might we expect? The demand for looms would be more elastic than the demand for tobacco. The demand for looms would be less elastic than the demand for tobacco. The supply of looms would be less elastic than the supply of tobacco. The supply of looms would be more elastic than the supply of tobacco.

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter2: Fundamental Economic Concepts

Section: Chapter Questions

Problem 4E