Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 3.4P
(a)
To determine
What kind of building represents substitution of capital for land.
(b)
To determine
Reason for the difficulty in substitution of capital for land.
(c)
To determine
Graphical illustration of total cost.
(d)
To determine
Why the demand for land is high in the center of the city.
(e)
To determine
Supply of land.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Since the end of World War II, manufacturing firms in the United States and in Europe have been moving farther and farther outside of central cities. At the same time, firms in finance, insurance, and other parts of the service sector have been locating near downtown areas in tall buildings. One major reason seems to be that manufacturing firms find it difficult to substitute capital for land, whereas service-sector firms that use office space do not.
d. Why is the demand for land likely to be high near the center of a city?
*e. One of the reasons for substituting capital for land near the center of a city is that land is more expensive near the center. What is true about the relative supply of land near the center of a city? (Hint: What is the formula for the area of a circle?)
List the capital inputs necessary to produce each of the following.
cars
high-school education
plane travel
fruits and vegetables
Which of the following statements about capital are correct?
a) In economic jargon capital is the net worth of a business enterprise.
b) Capital is defined as anything that is produced that then produces other things
c) An increase in capital will grow the economy because capital is a resource in the production process and an increase in resources increases the production possibilities or potential production of the economy.
d) Capital represents the tools that labor uses and thus an increase in capital tends to increase the productivity of labor (and possibly other resources) and that magnifies economic growth.
e) Most technological advances involve improvements to the tools of production, which is capital, so embodiment of new technology in capital is yet another way capital fosters economic growth.
f) increasing capital in the economy has to lead to greater income inequality, since most capital is owned by the rich.…
Chapter 7 Solutions
Principles of Economics (12th Edition)
Knowledge Booster
Similar questions
- An effluent fee is imposed on a steel firm to reduce the amount of waste materials that it dumps in a river. Use the following two statements to answer this question: I. The more easily factors of production can be substituted for one another (for example, capital can be used to reduce waste water), the more effective the fee will be in reducing effluent. II. The greater the degree of substitution of capital for waste water, the less the firm will have to pay in effluent fees. (Hint: See Example 7.4 in the textbook) A. Both I and II are true B. I is true and II is false C. Both I and II are false D. I is false and II is truearrow_forwardAlice runs a shoemaking factory that utilizes both labor and capital to make shoes. Which of the following would shift the factory’s demand for capital? You can select one or more answers from the choices shown a. Many consumers decide to walk barefoot all the time. b. New shoemaking machines are twice as efficient as older machines. c. The wages that the factory has to pay its workers rise due to an economy-wide labor shortage.arrow_forwardDetermine whether each of the following would increase or decrease the opportunity costs for mothers who decide not to work outside the home. Explain your answers. Higher levels of education for women Higher unemployment rates for women Higher average pay levels for women Lower demand for labor in industries that traditionally employ women Many households supplement their food budget by cultivating small vegetable gardens. Explain how each of the following might influence this kind of household production: Both husband and wife are professionals who earn high salaries. The household is located in a city rather than in a rural area. The household is located in a region where there is a high sales tax on food. The household is located in a region that has a high property tax rate.arrow_forward
- In your "toast" production function, you used your labor and a toaster as capital. Keeping capital constant, i.e., with only one toaster if you keep adding the labor, i.e., bring your friends to help you with making toasts, which of the following might happen? Group of answer choices Marginal returns to labor will be a constant. Marginal returns to labor will keep decreasing and, after a point, it will become negative. Marginal returns to labor will keep increasing. Marginal returns to labor will keep increasing and then be a constant.arrow_forwardThe information on three different technologies named as q, v and x is listed in the table below. Note that all of these technologies use different combinations of two types of factors of production, labor and capital, to produce 1000 units of output. Consider the first scenario where the per unit prices of the inputs, labor and capital are $50 and $25 respectively. Technology No of Labors Capital (tons) Cost value ($) A 10 50 B 30 20 C 50 10 Now imagine that a discovery has been made which has led to labor advancements leading to a reduction in per unit price of labor to $10, ceteris paribus. Which technology will a typical firm adopt under these changed circumstances and why? Using the value of costs found, what is the value of the economic rent for this firm?arrow_forwardMost firms in the apparel and footwear industries choose to outsource production to countries where labor is abundant (primarily, Southeast Asia and the Caribbean)long dash—but those firms do not integrate with their suppliers there. On the other hand, firms in many capital-intensive industries choose to integrate with their suppliers. What could be some differences between the labor-intensive apparel and footwear industries on the one hand and capital-intensive industries on the other hand that would explain these choices? A multinational may prefer toarrow_forward
- Suppose you are a department manager in a large consulting firm, and you have an assignment to produce a customized automated billing system for a client in the next week. Your boss asks you to find the least costly way to produce the billing system. To produce the billing system, you'll need to use computers and programmers. The blue isoquant curve on the following graph shows the combinations of computers and programmers that you can use to create the billing system in a week. CAPITAL (Number of computers) 10 9 8 7 3₂ 1 0 O 1 2 3 4 5 7 LABOR (Number of programmers) 6 8 9 10 A TC ?arrow_forwardIdentify 10 examples of direct factors (labor, capital, technology, resources) used for production and 10 examples of indirect factors (i.e factors other than labor, capital, technology, or resources).arrow_forwardIntroduction to Calculus in Economics (continued): In the previous Problem Set question, we started looking at the cost function C (x), the cost of a firm producing z items. An important microeconomics concept is the marginal cost, defined in (non-mathematical introductory) economics as the cost of producing one additional item. If the current production level is z items with cost C (x), then the cost of computing h additionial items is C (+h). The average cost of those h items (C(r+h)-C(x)) is As we analyze the cost of just the last item produced, this can be made into a mathematical model by taking the limit as h → 0, h i.e. the derivative C' (x). Use this function in the model below for the Marginal Cost function MC (x). Problem Set question: The cost, in dollars, of producing z units of a certain item is given by C (2) = 0.043 – 20x+ 350. (a) Find the marginal cost function. a ab Va a sin (a) MC (x) = E (b) Find the marginal cost when 60 units of the item are produced. The marginal…arrow_forward
- Suppose that a firm that produces face masks is in a long-run equilibrium setting where it has 3 units of capital and 3 units of labor, and where MRTS = w/r. Then suddenly in March 2020, the price of face masks increases due to increasing demand: In a graph with capital on the y-axis and labor on the x-axis, graph how the increase in price will change the firm’s input choices (labor and capital) in the short-run (when only labor can adjust). Will the new choice of inputs be on the expansion path? Suppose that entry into the face mask production industry is very costly. In the same graph, graph how the increase in price will change the firm’s input choices in the long-run (when both labor and capital can adjust). Will the new choice of inputs be on the expansion path? Now suppose that entry into the face mask industry is free and that this is a constant cost industry. What will happen to price in the long run? How will the firm’s input choices (labor and capital) change in the…arrow_forwardThe production engineers at Impact Industries have derived the optimal combinations of labor and capital. These are the only two inputs used by Impact. The following chart shows the combinations of labor and capital for three levels of output. Q is the output level. L* is the optimal amount of labor. K* is the optimal amount of capital. The price of labor is $90 per unit. The price of capital is $15 per unit. Q L* K* 120 5 20 180 7 7 240 12 24 a) If the manager of Impact Industries decides to produce 120 units, what will the long-run total cost and long-run average cost of producing 120 units? Show all calculations. b) If the manager of Impact Industries decides to produce 180 units, what will the long-run total cost and long-run average cost of producing 180 units? Show all calculations. c) If the manager of Impact Industries decides to produce 240 units, what will the long-run total cost and long-run average cost of producing 240…arrow_forwardThe production engineers at Impact Industries have derived the optimal combinations of labor and capital. These are the only two inputs used by Impact. The following chart shows the combinations of labor and capital for three levels of output. Q is the output level. L* is the optimal amount of labor. K* is the optimal amount of capital. The price of labor is $90 per unit. The price of capital is $15 per unit. Q L* K* 120 5 20 180 7 7 240 12 24 a) If the manager of Impact Industries decides to produce 120 units, what will the long-run total cost and long-run average cost of producing 120 units? Show all calculations. b) If the manager of Impact Industries decides to produce 180 units, what will the long-run total cost and long-run average cost of producing 180 units? Show all calculations.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningEconomics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning