EBK PRINCIPLES OF MACROECONOMICS
12th Edition
ISBN: 9780134079592
Author: Oster
Publisher: YUZU
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Chapter 15, Problem 2.4P
To determine
Adjustment costs, excess labor and excess capital.
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A delivery company is considering adding another vehicle to its delivery fleet; each vehicle is rented for $350 per day. Assume that
the additional vehicle would be capable of delivering 1,750 packages per day and that each package that is delivered brings in $0.35
in revenue. Also assume that adding the delivery vehicle would not affect any other costs.
Instructions: Enter your answers rounded to 2 decimal places.
a. What is the MRP? What is the MRC?
MRP = $
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MRC = $
Should the firm add this delivery vehicle: (Click to select) v
b. Now suppose that the cost of renting a vehicle doubles to $700 per day. What are the MRP and MRC?
MRP = $
MRC = $
Should the firm add a delivery vehicle under these circumstances: (Click to select) v
c. Next suppose that the cost of renting a vehicle falls back down to $350 per day but, due to extremely congested freeways, an
additional vehicle would only be able to deliver 750 packages per day. What are the MRP and MRC in this situation?
MRP = $
MRC = $
A U.S. electronics manufacturer is considering moving its production abroad. Suppose its production function is
9=L0.7K0.3
In the United States, w = $7 and r = 3. In Mexico, the wage is 50% lower than in the United States but the firm faces the same cost of capital:
w* = $3.50 and r* = 3.
What are L and K and what is the cost of producing q = 100 units in both countries? (for all of the following questions, enter a numeric response
using a real number rounded to two decimal places)
and the cost of production is $
and the cost of production is $
In the U.S., L is
In Mexico, L is
Kis
Kis
“My friend, Mike, is a CPA and owns his own tax business. During tax season, he hires additional workers. Would you expect Mike’s office to experience diminishing marginal product of labor? Would you expect diminishing marginal product of capital? Why or why not?”
Chapter 15 Solutions
EBK PRINCIPLES OF MACROECONOMICS
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