MACROECONOMICS W/CONNECT
18th Edition
ISBN: 9781307253092
Author: McConnell
Publisher: Mcgraw-Hill/Create
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Question
Chapter 8, Problem 6RQ
To determine
Change in cost of production as a result of increasing output.
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The per-unit cost of an item is its average total cost (= total cost/quantity). Suppose that a new cell phone application costs $200,000 to develop and only $0.50 per unit to deliver to each cell phone customer.
a. What will be the per-unit cost of the application if it sells 100 units?
b. What will be the per-unit cost of the application if it sells 1,000 units?
c. What will be the per-unit cost of the application if it sells 1 million units?
The graph below represents per-worker production functions for the same country. Answer the following questions using this graph.
Which 1 concept explains that the area between B and C has a flatter slope than the area between A and B?
Answer:
Law of Diminishing Marginal Returns
What has to happen for a country to move from point E to B to D?
Answer:
The movement through which 3 points (out of 5 given) would indicate the largest increase in productivity?
Answer:
Why does adding capital to a production function make the economy more productive? What are diminishing returns to capital? How does technology affect productivity and growth?
Chapter 8 Solutions
MACROECONOMICS W/CONNECT
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- What is meant by technological advance, as broadly defined? How does technological advance enter into the definition of the very long run? Which of the following are examples of technological advance, and which are not: an improved production process; entry of a firm into a profitable purely competitive industry; the imitation of a new production process by another firm; an increase in a firm’s advertising expenditures?arrow_forwardState how is the law of diminishing returns reflected in the shape of total product curve? What is the relationship between diminishing returns and the stages of production?arrow_forwardAssume the production function takes the general form: Y=Z*F (K,L,A)where all marginal products are positive.Which 3 of the following statements are correct?a. If A is fixed, then population growth acts as a drag on growth of output per person.b. If A is fixed, then population growth acts as a drag on growth, and so Malthus was correct that populationgrowth will always reverse the impact of technological improvements.c. Both rises in z and rises in K/L (capital intensity) will boost output per worker.d. Growth in output per worker can occur due to rises in z (technology) or rises in K/L (capital intensity), orboth.arrow_forward
- 6. Consider a hypothetical economy that has the production function Y = = F (K, LE) = K¹/3 (LE) 2/3, where Y is output, K is capital, and LE is the number of effective workers. Suppose the saving rate is 20%, the capital depreciates by 3%, the population grows at the rate of 1%, and the rate of labor-augmenting technological change is 1%. a. Solve for the per-effective-worker production function.arrow_forward0.5 0.5 Given a production function: Y = AK N If output grows at 5%, capital grows at 2% and the number of workers grows at 4%, then technology (or total factor productivity) grows at % ? (Answer in integer only, no decimal place.) Your Answer: Answer Given a production function: Y = AK0.5 N0.5. If output grows at 5%, capital grows at 2% and the number of workers grows at 4%, then technology (or total factor productivity) grows at %? (Answer in integer only, no decimal place.) Your Answer: Answerarrow_forwardThe per-unit cost of an Item is its average total cost (total cost/quantity). Suppose that a new cell phone application costs $100,000 to develop and only $.50 per unit to deliver to each cell phone customer. What will be the per-unit cost of the application If It sells 100 units? Instructions: Round your answer to two decimal places. Per-unit cost-$ What will be the per-unit cost of the application If It sells 1000 units? Instructions: Round your answer to two decimal places. Per-unit cost-$ What will be the per-unit cost of the application if it sells 1 million units? Instructions: Round your answer to two decimal places. Per-unit cost-Sarrow_forward
- What’s the formal name for the A_bar parameter in the production model we study? A. Average GDP B. Total factor productivity C. Per capita GDP D. Per capita capitalarrow_forwardSirius XM acquired Pandora, was this about scope or scale economies? How does economies of scale and scope differ, and how is growth in this case created from either an economy of scope or scale?arrow_forwardFor each of the following, identify which inputs into the production function changed(i.e., Physical Capital, Human Capital, or Labor). Also identify whether this phenomenon will increase or decrease economic growth.(a) The government increases federal aid for students to go to college.(b) States embark on a program to increase charging networks for electric cars.(c) A big chunk of the population decides to drop out of the workforce to spend moretime playing video games.arrow_forward
- Why does agricultural output tend to increase along with population, in contrast to Malthus's predictions? Irrigation, fertilizers, and conservation techniques increase the amount of arable land. Specialization and division of labour tend to increase agricultural output. In the long run, land is not a fixed resource. The law of diminishing returns only applies in theory, not in practice.arrow_forwardBy choosing a point along the total physical product curve, physical output is Quantity Outputs y O Output= A f {Land, Labor, Capital, Technology, Entrepreneurship) where A represents the productivity of resources. Quantity Inputs 2.3 2.4 T.arrow_forwardThe table below shows various values of labour (L), capital (K), and technology (T) for Economies A, B, and C. In each case, the aggregate production function takes the following form: Y = T x KL Economy A Economy B Economy C L. K LK I L K T on 100 50 100 50 100 50 2 110 50 110 55 110 55 4 120 50 2 120 60 120 60 130 50 130 65 2 130 65 8. 140 50 2. 140 70 140 70 10 150 50 150 75 150 75 12 TABLE 25-4 Refer to Table 25-4. The production function that applies to Economies A, B, and C displays Select one: O a. constant returns to scale. O b. diminishing marginal returns to capital. O c increasing returns to scale. O d. increasing marginal returns to capital. O e. Both C and D are correct. 6 2.arrow_forward
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