Suppose that a firm uses 3 units of available input at a price of $3/unit. Also, the firm uses 8 units of avariable input at a price of $6/unit. Then the marginal input cost equals:$7.8/unitа.b. $39/unit$48/unitс.d. Can't tell; insufficient information

Marginal cost:Marginal cost is the cost which is determined by dividing the change in cost of…

Answered: Suppose that a firm uses 3 units of…

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter4: Extent (how Much) Decisions

Section: Chapter Questions

Problem 9MC

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X and Y are factors of production. X's marginal product is 30 and Y's marginal product is 20. X=5 dollars for each unit, Y= 4 dollars for each unit. Since Y costs less than X, can the firm keep produce the same output at a cheaper cost by using less of X and more of Y? Explain why or why not.
A firm’s product sells for $4 per unit in a highly competitive market. The firm produces output using capital (which it rents at $25 per hour) and labor (which is paid a wage of $30 per hour under a contract for 20 hours of labor services). Complete the table and use that information to answer these questions. a. Identify the fixed and variable inputs. b. What are the firm’s fixed costs? c. What is the variable cost of producing 475 units of output? d. How many units of the variable input should be used to maximize profits? e. What are the maximum profits this firm can earn? f. Over what range of the variable input usage do increasing marginal returns exist? g. Over what range of the variable input usage do decreasing marginal returns exist? h. Over what range of input usage do negative marginal returns exist?
Production Total Product Total Fixed Cost Total variable cost Total Cost Average fixed cost Average variable cost Average Total Cost Marginal Cost 0 0 1 25 2 45 3 60 4 70 5 85 6 105 7 135 8 180 9 240 10 315 Assume that fixed costs are $50, labor is the only variable input and its costs are reflected completely in the costs above.
Assume that a firm’s total revenue is $200,000 per year. It pays its workers wages of $105,000 per year and buys raw materials of $80,000 per year. If the owner has $200,000 invested in this business and could earn 9% by placing this $200,000 in another business, then A) economic profits and accounting profits are both positive. or B)opportunity cost is zero.
A business owner makes 1,000 items a day. Each day she contributes eight hours to produce those items. If hired elsewhere, she could have earned $250 an hour. The item sells for $15 each. Production does not stop during the weekends. If the explicit costs total $150,000 for 30 days, the firm’s accounting profit for the month equals: $300,000 $60,000 $450,000 $240,000 Refer to the situation in part (1). Assume the owner’s only opportunity cost is her foregone salary. If she works 56 hours a week (8 hours a day for 7 days), is the firm making an economic profit? Yes No If the firm is earning negative economic profits, it implies That the accounting profits are zero That the accounting profits are negative That the accounting profits are positive That more information is needed to determine accounting profits. The fixed-cost fallacy occurs when A firm considers irrelevant costs A firm ignores relevant costs A firm considers overhead or depreciation costs to make short-run decisions Both a…
Assume quantities need not be integers. Marginal cost is MC(q) = 6 + (9/10) * q. Total cost is TC = 456 at q=5. What is the fixed cost of production?
On Monday, a coffee shop has one worker and one coffee machine. The manager hires a second member of staff on Tuesday. The two workers argue with each other and production on Tuesday is less than it was on Monday. What technical assumption over production functions does this violate? Explain your answer.
A manager hires labor and rents capital equipment in a very competitive market. Currently the wage rate is $12 per hour and capital is rented at $8 per hour. If the marginal product of labor is 60 units of output per hour and the marginal product of capital is 45 units of output per hour, is the firm using the cost-minimizing combination of labor and capital? If not, should the firm increase or decrease the amount of capital used in its production process?
When a firm produces one unit, the variable cost is $3. When the firm produces two units, the variable cost is $6. What is the marginal cost associated with two units of production? A) $2 B) $0.5 C) $6 D) $3
On Monday, a coffee shop has one worker and one coffee machine. The manager hires a second member of staff on Tuesday. The two workers argue with each other and production on Tuesday is less than it was on Monday. What technical assumption over production functions does this violate? Explain your answer please.
Suppose that the production function for Hannah and Sam's home remodeling business is Q = F(L,K) Q = 10L0.1K0.4.Assume the wage rate is $8,000 per week and the cost of renting a unit of capital is $1,000 per week.a. What is the least-cost input combination for remodeling 400 square feet each week? Instructions: Round your answers to 2 decimal places. units of labor and units of capital. b. What is the total cost? Instructions: Round your answer to 2 decimal places. $ .revised jrl 08-11-2011
1. A firm’s production function is Q = L1/2 K1/2 They have 16 units of capital (which is fixed in the short-run). The unit cost of labour is 2 and the unit cost of capital is 4. They receive an order of 4. a) Is the cost of fulfilling the order lower in the short- or long-run? Why is this the case?

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Suppose that a firm uses 3 units of available input at a price of $3/unit. Also, the firm uses 8 units of a variable input at a price of $6/unit. Then the marginal input cost equals: $7.8/unit а. b. $39/unit $48/unit с. d. Can't tell; insufficient information