EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 14, Problem 6RQ
To determine
Profit maximization.
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acroeconómic Policy and Natural Resources (10)|| Sp
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When a par ar firm is fully utilizing its capital, its output is given by Y = 10 × LO5. The cost of labour is OMR1 per
unit. To maximize profit, how many units of labour should this firm use?
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O a. 50
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O b. 100
О с. 5
O d. 25
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Refer to the following table. What is the average product
of the 4th worker?
Number of
Workers
0
1
2
3
4
LO
5
6
Units of
Capital
4 units of output
LO
5
LO
5
5
5
5
5
LO
5
Group of answer choices
3 units of output
16 units of output
6 units of output
Output
0
2
LO
5
9
16
22
23
. Suppose that a car dealership wishes to see if efficiency wages will help improve its salespeople’s productivity. Currently, each salesperson sells an average of one car per day while being paid $20 per hour for an eight-hour day. LO17.8
What is the current labor cost per car sold?
Suppose that when the dealer raises the price of labor to $30 per hour the average number of cars sold by a salesperson increases to two per day. What is now the labor cost per car sold? By how much is it higher or lower than it was before? Has the efficiency of labor expenditures by the firm (cars sold per dollar of wages paid to salespeople) increased or decreased?
Suppose that if the wage is raised a second time to $40 per hour the number of cars sold rises to an average of 2.5 per day. What is now the labor cost per car sold?
If the firm’s goal is to maximize the efficiency of its labor expenditures, which of the three hourly salary rates should it use: $20 per hour, $30 per hour, or $40 per hour?…
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- You are an employer seeking to fill a vacant position on an assembly line. Are you more concemed with the average product of labor or the marginal product of labor for the last person hired? O A. The marginal product of labor because to maximize profits, you will want to hire labor up to but not exceeding the point where labor begins to experience diminishing marginal returns. O B. The average product of labor because productivity is maximized when average product is maximized This determines the output where revenue and profit are maximized. O C. The average product of labor because to maximize profits, you will want to hire labor up to but not exceeding the point where labor begins to experience diminishing marginal returns O D. The marginal product because it measures the effect the last person hired has on output, or total product. This helps determine the revenue generated by hiring an another worker, which can be compared with the cost of hiring an another workerarrow_forwardSuppose that low-skilled workers employed in clearing woodland can each clear one acre per month if each is equipped with a shovel, a machete, and a chainsaw. Clearing one acre brings in $1,000 in revenue. Each worker’s equipment costs the worker’s employer $150 per month to rent and each worker toils 40 hours per week for four weeks each month. LO17.6 Now consider the employer’s total costs. These include the equipment costs as well as a normal profit of $50 per acre. If the firm pays workers the minimum wage of $6.20 per hour, what will the firm’s economic profit or loss be per acre? At what value would the minimum wage have to be set so that the firm would make zero economic profit from employing an additional low-skilled worker to clear woodland?arrow_forwardThe table shows the daily production of Papaya Co., that supplies papayas to hotels and restaurants in Manila Price of 1 kg. =P50, Daily wage per worker = P500 What is the marginal product of each of the 6th to 10th workers? [Select] No. of Total MP (kg) AP (kg) Law of Diminishing marginal returns sets in after how many workers? per per Workers Product (kg) worker worker [Select] O 5 10 5 15 20 25 30 35 0 1500 4500 10500 18000 24000 27000 28000arrow_forward
- What is the Average Total Cost (ATC) for producing 84 units of output? Quantity of Labor 5 7.4 7 7.62 0 1 2 3 4 сл 5 LO 6 Total Output 0 16 40 60 72 80 84 Fixed Cost $160 Variable Cost $80 $160 $240 $320 $400 $480 Total Costarrow_forwardIf, by increasing the qulf, by increasing the quantity of labour used by one unit, the firm can give up 2 units of capital and still produce the same output, then the MRTSLK is: antity of labour used by one unit, the firm can give up 2 units of capital and still produce the same output, then the MRTSLK is: O 4 O 1 O 2 O 0.5arrow_forwardCompete the table and use the data to answer the question below. Units of labour (N) Total Product (TP) Average Product (AP) Marginal Product (MP) 1 2 3 + LO 5 6 45 66 100 The total product of 4 units is a) 20 b) 80 c) 84 d) 114 21 20 14arrow_forward
- A firm produces output (y) using two inputs, labor (L) and capital (K), according to the following Cobb-Douglas production function: y = f(L, K) = Lº25 K0.75. Assuming that we draw the isoquant map with labor on the horizontal axis and capital on the vertical axis, what is the slope of this firm's isoquant when L = 120 and K = 60? Give your answer to two decimal places and remember that the sign matters when describing the slope of an isoquant.[_____________] Part 2 : See Hint Assume that L = 120 and K = 60 and suppose that the firm decides to reduce its use of capital and replace those machine hours with some additional labor hours. Approximately how many labor hours will the firm need to add for each machine hour it cut in order to maintain the same level of output (i.e., stay on the same isoquant)? Give your answer to two decimal places. [__________] labor hoursarrow_forwardThe production function of a country is Y=K^(1/2)L^(1/2). If economy starts with 10 units of capital per worker, 25 percent of output is saved and 10 capital stock depriciates every year, find the first year's change in the capital stock for this country, O a. 0.47 O b. 0.84 O c. 0.36 O d. 0.11 O e. 0.22arrow_forwardThe function for total production of a certain metal at a mining operation is modeled by P(KL)=40- KU.3. Lº. where K represents capital spending, in units of $200,000 and L represents labor costs, in units of 10,000 labor-hours. Each hour of labor has an total cost of $70. If the company budgets $20,000,000 for the current year, determine how much should be spent on capital, how much on labor, and what total production they expect. Round production to the nearest 0.1. UIC Click here to create a new row The amount to be spent on Capital is K= ,on Labor is L= and total Production isarrow_forward
- 6.Which of the following are short-run and which are long-run adjustments? LO3 a.Wendy’s builds a new restaurant. b.Harley-Davidson Corporation hires 200 more production workers. c.A farmer increases the amount of fertilizer used on his corn crop. d.An Alcoa aluminum plant adds a third shift of workers.arrow_forwardWhich of the following are short-run and which are long-run adjustments? LO9.1 a. Wendy’s builds a new restaurant. b. Harley-Davidson Corporation hires 200 more production workers. c. A farmer increases the amount of fertilizer used on his corn crop. d. An Alcoa aluminum plant adds a third shift of workers.arrow_forwardCan a firm have a production function that exhibits increasing returns to scale, constant returns to scale, and decreasing returns to scale as output increases? Discuss. O A. No. The functional form of the production technology dictates the type of returns to scale it exhibits. While a production function can exhibit both increasing returns and constant returns to scale at different levels of output, increasing returns and decreasing returns to scale are mutually exclusive. O B. Yes. At low levels of output, specialization leads to increasing returns to scale. Once specialization has been exhausted, proportional increases in all inputs lead to constant returns to scale. And finally, for large scale operations, logistical and bureaucratic problems can lead to decreasing returns to scale. O C. No. The functional form of the production technology dictates the type of returns to scales it exhibits, and there will only be one of the three types of returns to scale exhibited throughout the…arrow_forward
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