1.) Production, Inputs, and Cost: Building Blocks for Supply Analysis The firm can generally substitute one input for another. Whether or not it pays to substitute depends on the relative costs of labor and machinery. First, describe the alternative types of input proportions available to the firm. Then, describe the combination of inputs that represent the least costly way for the firm to produce its goods. Lastly, give one example of the firm’s substitutability from a recent news article.

1.) Production, Inputs, and Cost: Building Blocks for Supply Analysis The firm can generally substitute one input for another. Whether or not it pays to substitute depends on the relative costs of labor and machinery. First, describe the alternative types of input proportions available to the firm. Then, describe the combination of inputs that represent the least costly way for the firm to produce its goods. Lastly, give one example of the firm’s substitutability from a recent news article.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter21: Production And Costs

Section: Chapter Questions

Problem 15QP

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3. The production function for diapers is: q = 6L12 K2 Where q is the number of diapers produced, L is labor hours, and K is machine hours. Assume that the firm can use part of an hour of capital and part of an hour of labor. а) If the diaper firm wants to produce q = 60, what combination of L and K would it use if the rental rate of capital= Pg = $4/hour and the wage rate of labor = P, = $2/hour? 2 b) If the diaper firm continues to produce q = 60, what combination of L and K would the firm use if Pg stayed the same, but P, increased to $4/hour? If P, = $4 and P = $4, how much K and L would the diaper firm use to produce 36 diapers? 30 diapers? d) Using your answers to (b) and (c) graph the long-run average cost curve for the firm.
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Which firm would have more ability to respond to a change in input prices, one where inputs are perfect substitutes or one where they are combined in proportions? Use graphs to help demonstrate answer
15. Explain the following: a) Why would a U-shaped Average Cost (AC) curve result from a Total Cost curve TC = f(Q), where TC is initially concave and then convex. Assume that f(0) = 0. b) Why would the marginal cost (MC) curve intersect the U-shaped AC curve from below at the minimum point of AC, i.e., the MC curve lies below AC to the left of the minimum point on AC and MC lies above AC to the right of the minimum point on AC?
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The price of oil is currently over $80 per barrel and has been as high as $90 per barrel after Saudi Arabia and a couple of oter OPEC countries reduced output this year. The demand for oil is expected to increase by 1 million barely per day over the next year according to the International Energy Agency but OPEC+ has been unclear about its intentions of increasing oil supplies. a. If OPEC+ increases its production by million barrels per day, we can unambiguously say that the equilibrium price will fall, and the equilibrium quantity will rise.
The table below provides information about the cost of inputs and value of output for the production of a road bike. Note there are four different stages of production. Raw materials Rubber for one tire ($25) Aluminum for the frame ($75) Other component materials ($90) Manufacturing Tire maker sells tires for $40 each Frame maker sells bike frame and components for a total of $275 Instructions: Enter your answers as a whole number. a. What value is added by the supplier of the raw materials? $ b. What value is added by the tire maker? $ c. What value is added by the maker of the frame and components? $ d. What value is added by the bike mechanic? $ e. What value is added by the bike store? $| f. What is the total contribution of the bike to GDP? $ Construction Bike mechanic puts everything together and sells the bike for $375 Sale by the retailer Retailer sells the bike for $600