Principles of Microeconomics, California Edition
2nd Edition
ISBN: 9780393622102
Author: Dirk Mateer, Lee Coppock
Publisher: NORTON
expand_more
expand_more
format_list_bulleted
Question
Chapter 14, Problem 11SP
To determine
Describe the answer based on given cost structure.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
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?
True or false and explain
Suppose a firm’s marginal product of labour is MPL = 10/L, where L is measured in labour hours, the price of the product is $600, and the cost per hour of labour is $30. The firm currently employs 150 labour hours. In order to maximize the firm’s profits in the short run, the manager should increase its labour employment by 40 labour hours.
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 14 Solutions
Principles of Microeconomics, California Edition
Knowledge Booster
Similar questions
- Roland Umbrellas has a production function given by Q = L0.5K0.5. The wage (W) is $80 per day and the rental per unit of capital (R) is $5 per day. In the long run, how many units of capital will Roland want to buy for each unit of labor?arrow_forwardA firm produces a good using two inputs, capital (K) and labour (L). For every unit of output being produced, the ratio of capital to labour must be , where is a positive parameter. Meanwhile, the total cost of production must equal $1,000. If the rental rate of capital is $20 per unit of capital, and the hourly wage is $10 per unit of labour, how much capital does the firm use for it production? a) k=100a/(2/a+1) b) k=100/a(2a+1) c) k=100/(2/a+1) d) k=100/(2a+1)arrow_forwardSuppose a firm is producing 2,475 units of output by hiring 50 workers (W = $20 per hour) and 25 units of capital (R = $10 per hour). The marginal product of labor and marginal product of capital are 30 and 15, respectively. Is the firm minimizing the cost of producing 2,475 units of output? Explain.arrow_forward
- A firm uses labor (L) and capital (K) to produce outputs. The following graph shows the iso-quant curves and iso-cost curves facing this firm. The iso-quant curves are the L-shaped curves. Suppose the wage rate of labor is $200 (per day) and the rental rate of capital is $100 (per day). What is the cost of producing 20 units of output (per day) when both labor and capital are variable inputs? Notice that both inputs are variable. alae-2 (3.6) -30 = 20 - 10 O 400 O 600 1000 1200 800arrow_forwardMaria's Umbrellas has a production function given by Q = L0.5K0.5. The wage (W) is $80 per day and the rental per unit of capital (R) is $5 per day. In the long run, how many units of capital will Maria want to buy for each unit of labor?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_forward
- Economics Suppose that production for good X is characterized by the following production function, Q = 4K0.5L0.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $12 and the per-unit wage, w, is $20, then the average total cost of using 25 units of capital and 49 units of labor is Multiple Choice $6.25. $9.14.Correct $10.07. incalculable since there is insufficient information to determine the average total costs.arrow_forwardSuppose that a firm’s production function is q =L0.5K0.5. This means that the marginal rate of technical substitution is K/L.The cost of a unit of labour is $20 and the cost of a unit of capital is $80. The firm wants to produce 50 units of output. If both capital and labour are variable, how many units of labour (L) and how many units of capital (K) should be hired in the long run? A. K = 25, L =100 B. K = 10, L = 100 C. K = 25, L =10 D. K = 7, L = 28arrow_forwardSuppose a firm producing wood burning stoves has the following production function Q(K, L) = 4K¹/2 [1/2 Where L, the labour, and K, the capital are the 2 inputs of production and Q the quantity of stoves. Assume the price of one unit of L is £1 and the price of one unit of K is £2. a) b) Assume that K=9 in the short run. Draw the production function and calculate the marginal products of L as L changes from L= 1 to L= 6. What does an isoquant curve show? Draw the graph of a production isoquant representing input combinations that will produce 8 units of output.arrow_forward
- Question 18 Consider a firm that has production function f(L,K)=4L2/3K1/3. What is the expression for this firm’s Marginal Product of labor? MPL(L,K)= 2K2/3/3L2/3. MPL(L,K)= 2K2/3/L1/3. MPL(L,K)= 2K1/3/3L1/3. MPL(L,K)= 5K2/3/3L2/3. MPL(L,K)= 8K1/3/3L1/3.arrow_forwardThe following table shows the relationship between the number of trainers working at the new gym (SD Fitness) and the number of clients they can train per week. These clients represent the output of the firm. Clients pay $60 per hour. Find the Marginal Product (MPL) for the 4th, 5th and 6th trainer. Find the Value of Marginal Product (VMPL) of the 4th, 5th and 6th trainer. SD Fitness’s trainers are paid $650 per week. How many trainers will the gym hire? How do you know?arrow_forwardSuppose that you are starting up a lawn-raking business. All of your workers are required to supply their own rakes, so the only cost to you is hiring labor at an hourly rate. Suppose that the market price of raking someone's yard is $50 per lawn and the hourly wage is $25 per hour. The follovwing graph shows the production function (PF) for your business. On the following graph, use the green line (triangle symbol) to plot the daily isoprofit curve that indicates the profit-maximizing level of output. (Hint: Derive the slope of the isoprofit curve and then move the curve up or down until it's in the position you want; this is because you do not know the amount of profit that will yield the desired curve.) Then use the black point (plus symbol) to indicate the profit-maximizing level of labor and output per day. 100 90 Isoproft 80 70 60 Profit Max 50 40 30 20 10 PF 10 20 30 40 50 60 70 80 90 100 LABOR (Hours per day) Complete the following table with your findings regarding the…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning