Principles of Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (12th Edition)
12th Edition
ISBN: 9780134421315
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 10, Problem 3.3P
To determine
The demand for land and increase in land price.
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Question 3
Mr. Stonewall has to set up a firm that produces calculators competing with the likes of Casio
and Sharp calculators. In order for to estimate the amount of labour and capital needed to
maximise profit in the long run, Mr. Stonewall has employed you to help him in this regard.
Currently, the competitive wage rate is set at ¢4 per unit of labour and capital is rented at ¢5
per unit. The forces of demand and supply in the industry has also set the equilibrium price of
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20K0.5 LO.5 + 7.5 and the firm total cost of production is ¢1690.
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11.
The following equations describe the long-run situation for prices and costs, where the numbers indicate the amounts of labor and capital needed to produce a unit of wheat and cloth. W is the wage rate/hour and R is the rental rate/hour.
Price of wheat = 1 W + 2 R
Price of cloth = 2 W + 1 R
In autarky, the price of wheat is 5 and the price of cloth is 4. As trade opens up, wheat price rises from 5 to 6. Cloth price remains at 4.
Consider Hypothetical Case 1 above. After trade opens up, how many units of wheat can a worker buy with one hour of labor?
A. 5/6
B. 2/15
C. 1/5
D. 1/9
E. None
Chapter 10 Solutions
Principles of Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (12th Edition)
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