16 - What is the amount of capital that is not needed to realize the current level of production called? A) full capacity B) Missing Capacity C) Idle Capital D) Idle Labor E) Excess capital
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16 - What is the amount of capital that is not needed to realize the current level of production called?
A) full capacity
B) Missing Capacity
C) Idle Capital
D) Idle Labor
E) Excess capital
Step by step
Solved in 2 steps
- (a) Complete the following table and draw the corresponding graphs. Capital inputs Labor inputs Total product Average product Marginal product 20 0 0 20 1 15 20 2 34 20 3 51 20 4 65 20 5 74 20 6 80 20 7 80 20 8 75 (b) What is relationship between MP and AP? Explain why MP first rises, then declines and ultimately becomes negative? (c) Whether the above phenomenon is long run or short run and why? (d) Does law of diminishing marginal returns holds in above scenario? Why and why not.1.Joe quits his computer programming job, where he was earning a salary of $50,000 per year, to start his own computer software business in a building that he owns and was previously renting out for $24,000 per year. In his first year of business he has the following expenses: salary paid to himself, $40,000; rent, $0; other expenses, $25,000. Find the accounting cost and the economic cost associated with Joe’s computer software business.5) Production Theory - The table below shows the production capabilities for a small fishing operation in the Pacific Northwest. Total Product (TP) refers to the number of pounds caught in a day. Fill in the missing columns below. L 0 1 2 3 4 456700 8 9 10 11 12 TP-q 0.00 7.00 18.00 33.00 46.00 55.00 62.00 67.00 71.00 74.00 76.00 76.00 74.00 MP AP
- 1. Show and explain the relationship between total product, average product and marginal product.Refer to the information provided in Figure 7.9 below to answer the questions that follow. Units of capital 80 60 A 0 Answer: B Diff: 3 Topic: Appendix: Isoquants and Isocosts Skill: Conceptual 197 Figure 7.9 6) Refer to Figure 7.9. If the price of capital is $25, then along isocost line AB total cost is A) $1200. B) $1500. C) $2000. D) indeterminate from this information since the price of labor is not given. Answer: B Diff: 2 Topic: Appendix: Isoquants and Isocosts Skill: Analytic B D E 60 80 120 Units of labor 7) Refer to Figure 7.9. The firm is currently along isocost CD. If the price of capital is $25, then the price of labor is A) $1. B) $25. C) $80. D) indeterminate from the information given. B) $24. 8) Refer to Figure 7.9. The firm is currently along isocost CE. If the price of capital is $24, then the price of labor is A) $16. C) $80. D) $120. Answer: A2. A firm uses capital (K) and labour (L) to produce luxury office chairs. The production technology is given by Q = K³/4L¹/4, where Q is the number of chairs produced. (a) What is the marginal product of capital and the marginal product of labour for this firm? (b) Does this production function display decreasing returns to scale, constant returns to scale or increasing returns to scale? Justify your answer. (c) Suppose that the firm has a contract with a national retailer who purchases Q office chairs from them per day. The firm faces prices pk = r and p₁ = w for capital and labour respectively. Find the firm's conditional input demands. (d) Now suppose that the firm's contract with the upstream retailer is coming to an end and they are considering whether to extend it or not. The retailer will purchase 1000 chairs per day at £50 per chair. If the firm does not extend their contract then they can sell their chairs locally and will face an inverse demand curve P(Q) = 500 - Q. Assume…
- 2. A firm uses capital (K) and labour (L) to produce luxury office chairs. The production technology is given by Q = K³/4L¹/4, where Q is the number of chairs produced. (a) What is the marginal product of capital and the marginal product of labour for this firm? (b) Does this production function display decreasing returns to scale, constant returns to scale or increasing returns to scale? Justify your answer. (c) Suppose that the firm has a contract with a national retailer who purchases Q office chairs from them per day. The firm faces prices PK = r and PL = w for capital and labour respectively. Find the firm's conditional input demands. (d) Now suppose that the firm's contract with the upstream retailer is coming to an end and they are considering whether to extend it or not. The retailer will purchase 1000 chairs per day at £50 per chair. If the firm does not extend their contract then they can sell their chairs locally and will face an inverse demand curve P(Q) = 500 - Q. Assume…Problem 1 (Harder) 1. Marginal product of capital and labor in a CRS Cobb-Douglas production function 2. Second partial derivatives with respect to capital and labor in a CRS Cobb-Douglas production function3. Production of taxi rides (15%) GlobalTaxi runs taxi services around the globe. GlobalTaxi uses two inputs in production: capital K and labor L. Capital has a rental cost of r, while labor is paid a wage w. (a) Derive the expression for GlobalTaxi's isocost function with labor on the right-hand side, and explain what it means. (b) Explain what happens to the slope of the isocost function when the wage w increases. How will an increase in w typically affect the choice of inputs for a company that has a smoothly declining marginal rate of technical substitution? Why?
- Consider the following set of data that looks at how output changes following changes in inputs. Quantity of Labour Quantity of Capital Output 0 5 0 10 5 100 20 5 250 30 5 450 40 5 575 50 5 650 Which of the following statements accurately describes what this data shows? (a) The firm experiences increasing marginal returns to labour at all levels of output. (b) The firm experiences first increasing marginal returns to labour and then runs into diminishing marginal returns. (c) The firm experiences diminishing marginal returns to labour at all levels of output. (d) The firm experiences first diminishing marginal returns to labour and then increasing marginal returns.4. F&D Manufacturing company increases all its inputs by 50 percent each. If F&D's output increases by 100 percent, then F&D is experiencing (A) increasing returns to scale (B) constant returns to scale (C) diseconomies of scale (D) increasing marginal cost1. Do the following production functions exhibit increasing, constant of decreasing returns to scale in K and L? Explain/interpret your answer. (a) Y = KL (b) Y = KL (c) Y = K³L¹