Pearson eText Microeconomics -- Access Card
2nd Edition
ISBN: 9780136849513
Author: Acemoglu, Daron, Laibson, David, List, John
Publisher: PEARSON
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Chapter 11, Problem 4Q
To determine
The consistency in different approaches to the optimization problem of firms.
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A profit-maximizing competitive firm uses just one input, x. Its production function is q= 4(x)^1/2. The price of out-put is $28 and the factor price is $7. The amount of the factor that the firm demands is?
The cost function c(w1,w2,y) of a firm gives the
cost of producing y units of output when the
wage of factor 1 is w₁, and the wage of factor 2
is w2. Find the cost functions for the following
firms:
a. A firm with production function f(x1,x2)=
min{2x1, 3x2}
b. A firm with production function f(x1,x2)= 2x1
+ 3x2
A manager hires labour 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, whereas the
marginal product of labour is 60 units of output
per hour and the marginal product of capital is
45 units of output per hour. Show if the firm is
using the cost-minimizing combination of
labour and capital and give appropriate advice if
necessary.
Chapter 11 Solutions
Pearson eText Microeconomics -- Access Card
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- A firm produces its product using only labor. Its production function is Q= 20L -L, where Qis the number of units of output produced and Lis the number of labor hours used. The firm purchases labor in a competitive labor market at the going wage rate of w = $12 per hour. The firm sells its output in a competitive market at the market price of P= $5. To maximize profit, the firm should use hours of labor and produce units of output. (Enter your responses rounded to two decimal places.)arrow_forwardTable below provides production data for Peg's Pie Shop, indicating the output per day with different numbers of employees. The shop sells its pies and hires its labor in perfectly competitive markets. Currently, the equilibrium price of a pie is $5, and the equilibrium wage rate is $80 per day. If the total fixed costs are equal $100 and labor is the only variable input and this firm hires the profit-maximizing number of workers, it will earn profit equal to Labor (#workers) O $40 O $70 O $230 O $130 0 1 2 3 4 5 Pies per day 0 20 60 90 110 120arrow_forwardWidget factory Inc. in Wisconsin has the following production function: F(L,K) = 2L1/2 K1/2 L represent the number of labour hours. Workers at this factory are paid an hourly wage of $30 and they rent capital at $25/hour. Since this is a competitive market, the factory output the factory gets per is output is $50 per unit. Let's pretend the firm operates in the short run with capital fixed at 900, how many factory workers would Widget Factory Inc employ? What is their profit rate?arrow_forward
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