Microeconomics - With Connect Plus Access
20th Edition
ISBN: 9781259660849
Author: McConnell
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 14, Problem 5DQ
To determine
Substitution and output effect.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Florida citrus growers say that the recent crackdown on illegal immigration is increasing the market wage rates necessary to get their oranges picked. Some are turning to $100,000 to $300,000 mechanical harvesting machines known as “trunk, shake, and catch” pickers, which vigorously shake oranges from the trees. If widely adopted, how will this substitution affect the demand for human orange pickers? What does that imply about the relative strengths of the substitution and output effects?
Florida citrus growers say that the recent crackdown on illegal immigration is increasing the market wage rates necessary to get their oranges picked. Some are turning to $100,000 to $300,000 mechanical harvesters known as “trunk, shake, and catch” pickers, which vigorously shake oranges from the trees. If widely adopted, what will be the effect on the demand for human orange pickers? What does that imply about the relative strengths of the substitution and output effects?
The marginal rate of technical substitution is:
The rate at which a producer is able to exchange, without affecting the quantity of output produced, a little bit of one input for a little bit of another input.
The rate at which a producer is able to exchange, without affecting the total cost of inputs, a little bit of one input for a little bit of another input.
The rate at which a producer is able to exchange, without affecting the total inputs used, a little bit of one onput for a little bit of another onput.
A measure of the case or difficulty with which a producer can substitute one technique of production for another.
Chapter 14 Solutions
Microeconomics - With Connect Plus Access
Knowledge Booster
Similar questions
- According to the Wall Street Journal, Mitsubishi Motors recently announced a major restructuring plan in an attempt to reverse declining global sales. Suppose that as part of the restructuring planMitsubishi conducts an analysis of how labour and capital are used in its production process. Prior to restructuring Mitsubishi’s marginal rate of technical substitution is 0.15 ( in absolute value). To hire workers. Suppose that Mitsubishi must pay the competitive hourly wage of US$ 15. In thestudy of production process and markets where capital is procured, suppose that Mitsubishi determine that its marginal productivity of capital is 0.5 small cars per hour at its new targeted level of output and that capital is procured in a highly competitive market. The same study indicates that the average selling price of Mitsubishi’s smallest car is US$ 9500. Determine the rate at which Mitsubishi can rent capital and marginal productivity of labour at its new targeted level of output. To minimize…arrow_forwardDistinguish between the Marginal Rate of Technical Substitution and Elasticity of Substitution in productionarrow_forwardAccording to The Wall Street Journal, Mitsubishi Motors recently announced a major restructuring plan in an attempt to reverse declining global sales. Suppose that as part of the restructuring plan Mitsubishi conducts an analysis of how labor and capital are used in its production process. Prior to restructuring Mitsubishi’s marginal rate of technical substitution is 0.12 (in absolute value). To hire workers, suppose that Mitsubishi must pay the competitive hourly wage of ¥1,800. In the study of its production process and markets where capital is procured, suppose that Mitsubishi determines that its marginal productivity of capital is 0.8 small cars per hour at its new targeted level of output and that capital is procured in a highly competitive market. The same study indicates that the average selling price of Mitsubishi’s smallest car is ¥1,200,000. Determine the rate at which Mitsubishi can rent capital and the marginal productivity of labor at its new targeted level of output. To…arrow_forward
- Describe the concept of the marginal rate of technical substitutionarrow_forwardThe marginal rate of substitution of both of them are not correct.arrow_forwarda) For an output level of 40 units, calculate the marginal rate of technical substitution between points A and B. b) Also for an output level of 40 units, calculate the marginal rate of technical substitution between points D and Earrow_forward
- Now assume there is production in the economy. What is the relation between the marginal rate of substitution and the marginal rate of transformation in a general competitive equilibrium? Derive such relation and explain the intuition behind it.arrow_forwardhow to find the marginal rate of substitution for perfect complementsarrow_forwardBriefly explain and graphically illustrate the property of diminishing marginal rate of technical substitution and its relation to marginal productivities.arrow_forward
- Suppose that a firm can not give up one input in an exchange for the other and still maintain the same level of output. Calculate the elasticity of substitution in this case and elaborate on your answer.arrow_forwardSuppose that a firm cannot give up one input in exchange for the other and still maintain the same level of output. Calculate the elasticity of substitution in this case and elaborate on your answer.arrow_forwardCould the marginal rate of substitution be 5 at point C? Justify your answer.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you