EBK MICROECONOMICS
13th Edition
ISBN: 8220106798652
Author: Arnold
Publisher: CENGAGE L
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Chapter 13, Problem 3QP
To determine
Check whether the MRP and VMP are equal for a price taker.
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What are the parameters of the problem? Find the conditional factor demand functions. Label them l(w,r,y) and k(w,r,y).Find the cost function: c(w,r,y). What is its interpretation?
Assume a firm is trying to produce q0 units of output at the lowest total cost. The wage decreases, rotating the isocost line as shown in the below graph. Make the necessary changes to the graph to show the input combination that will now produce q0 at the lowest total cost. Make sure you show the new levels of labor and capital.
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What are the parameters of the problem? Find the conditional factor demand functions. Label them l*(w, r, y) and k*(w, r, y). Find the cost function: c(w, r, y). What is its interpretation?
Chapter 13 Solutions
EBK MICROECONOMICS
Ch. 13.1 - Prob. 1STCh. 13.1 - Prob. 2STCh. 13.1 - Prob. 3STCh. 13.1 - Prob. 4STCh. 13.2 - Prob. 1STCh. 13.2 - Prob. 2STCh. 13.2 - Prob. 3STCh. 13.2 - Prob. 4STCh. 13 - Prob. 1QPCh. 13 - Prob. 2QP
Ch. 13 - Prob. 3QPCh. 13 - Compare the firms least-cost rule with how buyers...Ch. 13 - Prob. 5QPCh. 13 - Prob. 6QPCh. 13 - Prob. 7QPCh. 13 - Prob. 8QPCh. 13 - Prob. 9QPCh. 13 - Prob. 10QPCh. 13 - Prob. 11QPCh. 13 - Prob. 12QPCh. 13 - Prob. 13QPCh. 13 - Prob. 14QPCh. 13 - Prob. 15QPCh. 13 - Prob. 16QPCh. 13 - Prob. 1WNGCh. 13 - Prob. 2WNGCh. 13 - Prob. 3WNGCh. 13 - Prob. 4WNGCh. 13 - Prob. 5WNG
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- 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.arrow_forwardDefine price taker .arrow_forwardAt a fast food restaurant, the hourly wage is $9 per worker. The restaurant employs 15 workers per hour, and the marginal product of labour is 3 burgers per hour. The price of a single with cheese, which we pretend is the only thing the restaurant sells, is $3.50. Is the restaurant maximizing profit? If not, would it increase profits by hiring more workers or fewer workers?arrow_forward
- Jumbo Enterprises is the sole producer of jumbo jets in the economy. Demand for jets is given by y=2122-201p, where y is the number of jets and p is the price of a jet. The number of jets that Jumbo produces is a function of the number of engineers (N) that it hires. This function is given by y=0.8N. Engineers are hired in a competitive labor market, where the wage is equal to $6. Find Jumbo Enterprise's profit-maximizing choice of N. Answer:arrow_forwardwhat are the two most significant issues that occur for the current marginalist theory of the company when the firm employs constant-returns-to-scale (CRS) technology? Please answer correctly.arrow_forwardDo you see any conflict between your desire to be as profitable as possible and your desire to pay employees a living wage?arrow_forward
- what are two key problems that arise for the modern marginalist theory of the firm when the firm has a constant-returns-to-scale (CRS) technology?arrow_forwardWould the owner of a profit-maximizing clothing store hire another worker for $85 per day if the additional worker added faster service, increasing sales and revenue by $97 per day? Why or why not? Explain your answer.arrow_forwardSuppose a beverage company is profit-maximising. It has one factor of production, which is the amount of labour (l) it hires. For each hour of labour, the firm pays a wage 'w'. The production function is given by f(l) = l^1/2.(Assume that the price is equal to 1).a. Suppose that in equilibrium, the wage rate is fixed at w = 7. Solve for the firm’s optimal choice of how much labour to hire.b. Imagine the government votes to increase the minimum wage to w= 10. What happens to employment in the firm?c. Suppose the firm instead chooses to minimise the cost of producing a specific amount of q. Explain how this helps the firm maximise profits.arrow_forward
- Would the owner of a profit-maximizing clothing store hire another worker for $85 per day if that worker added faster service, increasing sales and revenue by $80 per day? Why or why not? Explain your answer.arrow_forwardThe production function of a competitive firm is described by the equation y = 1/2, 1/2 2.x26x. The factor prices are pi $3 and P2 $4 and the firm can hire as much of either factor it wants at these prices. What is the firm's marginal cost?arrow_forwardSuppose Fred produces 500 litres of milk every day with 10 workers. The price of milk is $12 per litre, and each worker is paid $550 daily. If the marginal product of the last worker employed is 40 litres of milk, explain whether Fred is maximizing his profit. If not, can Fred increase his profit by employing more or fewer workers? If Fred buys more dairy cattles, how will it affect his demand for labor? Explain with a diagram.arrow_forward
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