LABOR ECONOMICS LOOSELEAF 8/E
8th Edition
ISBN: 9781264010516
Author: BORJAS
Publisher: MCG
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Chapter 3, Problem 1P
To determine
Find the combination of input and the
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Calculate the Marginal Product (MP) at each input level.
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Tim works 51 hours per week, and his wage is $20 per hour. If his wage increases to $40 per hour, and his labor supply curve is downward-sloping, this means:
Chapter 3 Solutions
LABOR ECONOMICS LOOSELEAF 8/E
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- Suppose that a firm's estimated production is: Q = K³/411/4 What is the marginal rate of technical substitution (MRTS) equal to?arrow_forwardSuppose that the production of a certain product only requires one input, labor, and that the additional production diminishes by half after the last input. On the other hand, the demand of the good can be described using the equation Q = 10000 – P/10. The total product of the second unit of labor is 3,000 unite. Finally, each additional worker requires P1,000,000. Given the following information, answer the following questions: What is the marginal revenue product of the third unit of labor? Answer: 500 How would you characterize the marginal revenue product of labor? How would you characterize the labor market that this firm faces?arrow_forwardA firm has a production function of Q = KL + L, where MPL = K + 1 and MPK = L. The wage rate (W) is $100 per worker and the rental (R) is $100 per unit of capital. The firm is producing 100 units of output. In the long run, what is the firm's Marginal Rate of Technical Substitution?arrow_forward
- Suppose 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_forwardConsider the table below that describes the production function for a good (Q) in terms of inputs labor (L) and capital (K) in the short run. What is the marginal product of labor for the fourth worker? Enter the number below.arrow_forwardConsider the following production function: Currently the wage rate (w) is $5.00 and the price of capital (r) is $5.00. If the firm is using 20 units of capital in production, how much labor should be employed to minimize costs? Labor input = units. (Enter a numeric response using a real number rounded to two decimal places.) q=100L0.80.4arrow_forward
- A firm produces output according to the production function Q = 4K + 8L where K is capital and L is labour. If the wage rate is €60 and the cost of capital is €20, how many units of capital should the firm hire if it wants to produce 16 units of output? 4 2 0 08arrow_forwardConsider a firm that employs capital (K) and labour (L) and uses the production technology Q = 3K + 4L. Let factor prices be r = $40 for capital and w = $20 for labour. a) What is the firm’s minimization problem? b) Plot the isoquant for Q =100. What is the Marginal Rate of Technical Substitution (MRTS)? c) For any output Q, what is the optimal combination of K and L given the input prices? Hint set MRTS = r/w and solve for L) d) What is the cost function? Confirm C(Q=100) = 500 e) Given the above, what must the supply curve look like in long-run equilibrium?arrow_forwardSuppose a firm with a production function given by Q = 30K0.5L0.5 produces 1,800 units of output. The firm pays a wage of $50 per unit and pays a rental rate of capital of $120 per unit. MPL = 15K0.5/L0.5 ; MPK = 15L0.5/K0.5 . How many units of labor and capital should the firm employ minimize the cost of producing 1,800 units of output, and what would be the total cost?arrow_forward
- A firm produces its product using only labor. Its production function is Q= 20L -L, where Qis the number of units of output produced and Lis the number of labor hours used. The firm purchases labor in a competitive labor market at the going wage rate of w = $12 per hour. The firm sells its output in a competitive market at the market price of P= $5. To maximize profit, the firm should use hours of labor and produce units of output. (Enter your responses rounded to two decimal places.)arrow_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_forwardThe marginal rate of technical substitution of L=2K means that the firm can substitute 2 units of capital for an additional 1 unit of labor in the market. True or false.arrow_forward
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