Principles of Microeconomics (Second Edition)
2nd Edition
ISBN: 9780393623840
Author: Lee Coppock, Dirk Mateer
Publisher: W. W. Norton & Company
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?
Please find the atttached photo.
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.
Chapter 14 Solutions
Principles of Microeconomics (Second Edition)
Knowledge Booster
Similar questions
- 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_forwardRoland 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_forwardSuppose the price of labor used by a cost-minimizing firm decreases. The firm responds to the price change by changing its demands for certain inputs, but keeps its output constant. What happens to the firm’s use of labor? What happens to the firm’s production costs? Graphically show the new optimal bundle and associated isocost curve on the graph below.arrow_forward
- Suppose 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_forwardA 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_forward
- Charlie'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 Charlie want to buy for each unit of labor?arrow_forwardEconomics 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_forward
- Suppose 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_forwardTable 18-7 The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. Assume that labor is the only input that varies for the firm. Labor Marginal Product of Labor (Number of workers) (Boxes of envelopes per week) Wage (Dollars per worker per week) 0 1 147 448 2 123 448 3 105 448 4 95 448 5 90 448 Refer to Table 18-7. Suppose the firm sells each box of envelopes that it produces for $4. What is the marginal profit of the third worker? O $68 O $-28 -$68 $420arrow_forwardI need help on this questionarrow_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