Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 7, Problem 4TY
To determine
The long run period of the firm.
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Students have asked these similar questions
Suppose the hourly wage is $20 and the price of each unit of capital is $2. The price of output is constant at $20/unit. The production function and marginal product function, respectively, are shown below.
If the current capital stock is fixed at 2,500 units, how much labor should the firm employ in the short run? Show your work.
The following is cost information for the Creamy Crisp Donut Company Entrepreneur's potential earnings as a salaried worker - $60.000
Annual lease on building = $30,000
Annual revenue from operations = $250,000
Payments to workers = $100,000
Utilities (electricity, water disposal) costs = $8,000
Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000
Entrepreneur's forgone interest on personal funds used to finance the business = $6,000
If, other things equal, Creamy Crisp's revenue rose to $284.000
A. its implicit costs would exceed its economic costs
B.it would earn a normal profit but not an economic profit
C. it would suffer an economic loss
D. it's accounting profit would fall to $0
Question 21.21. Which would be an implicit cost for a firm? The cost
of worker wages and salaries for the firm.
paid for leasing a building for the firm.
paid for production supplies for the firm.
of wages foregone by the owner of the firm.
Question 22.22. Economic profits are equal to
total revenues minus fixed costs.
total revenues minus the costs of raw materials.
total revenues minus the opportunity costs of all inputs.
gross profit minus selling and operating expenses.
Question 23.23. The long run is a period of time, or a time frame, in which
all resources are fixed.
the level of output is fixed.
the amount of all resources can be varied.
the capacity of the production plant is fixed.
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- Question 16 When is it not in the best interest of a company to hire additional workers in the short run? when the average product of labor is decreasing when the firm is in Stage II of the production process when the marginal revenue product equals zero when the wage rate is equal to or greater than labor's marginal revenue productarrow_forwardConsider the long-run cost minimisation problem, with L on the horizontal axis and K on the vertical axis as usual. If the marginal rate of technical substitution for a cost minimizing firm is -8, and the rental rate of capital $5, what is the wage rate for labor? Group of answer choices 0.625 40 0.025 1.6arrow_forwardA firm has a Cobb-Douglas production function q = f(K, L) = KαL 1−α and faces wages, w, and rental rate of capital, r. 1. Does this production function exhibit increasing, decreasing, or constant returns to scale? 2. Find the short-run cost curve, C(q), as a function of q and the parameters. 3. Assume that K = 10, r = 1.5, w = 6, and α = 2/3. Derive expressions for MC, VC, FC, ATC, AVC, and AFC. Plot MC, ATC, AVC, and AFC, all on the same graph. 4. Assume that K = 10, r = 1.5, w = 6, and α = 2/3. Assume now that we know the market price is p = 18, which is fixed, and we are still operating in the short-run. What is the profit-maximizing choice of q? 5. Solve for profits, π, as a function of market price, p (and the model parameters). Then, assume as we did in subpart 3 that K = 10, r = 1.5, w = 6, and α = 2/3. Will profits ever be negative? If so, find the price range at which profits are negativearrow_forward
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