2. Consider the production functions given below: a. Suppose that the production function faced by a bread producer is given by Q = 4KL, where MPK = 4L and MP, = 4K. i. Do both labor and capital display diminishing marginal products in the short run? Explain. ii. Find the marginal rate of technical substitution for this production function. (Hint: The MRTS MPL MPK iii. Does this production function display a diminishing marginal rate of technical substitution? iv. Graph isoquants for Q = 20, and Q = 40. Put capital (K) on the y-axis and labor (L) on the x- axis. Label the isoquants with their quantities. v. What are the returns to scale for this firm? Explain. 20 19 18 17 16 15 14 13 12 11 10 9 0 1 2 3 4 5 6 00 9 10 11 12 13 14 15

2. Consider the production functions given below: a. Suppose that the production function faced by a bread producer is given by Q = 4KL, where MPK = 4L and MP, = 4K. i. Do both labor and capital display diminishing marginal products in the short run? Explain. ii. Find the marginal rate of technical substitution for this production function. (Hint: The MRTS MPL MPK iii. Does this production function display a diminishing marginal rate of technical substitution? iv. Graph isoquants for Q = 20, and Q = 40. Put capital (K) on the y-axis and labor (L) on the x- axis. Label the isoquants with their quantities. v. What are the returns to scale for this firm? Explain. 20 19 18 17 16 15 14 13 12 11 10 9 0 1 2 3 4 5 6 00 9 10 11 12 13 14 15

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Consider the production function: Y = z.f(K,N,L) where Y is output, z is a parameter capturing technology, K is capital, N is labour and L is the area of land. If z increases, then both average and marginal products of all inputs increase. Select one: O True O False
1. The formula used to calculate the number of units needed in order to earn a target income is a. (Fixed costs + variable costs) / Sales b. (Fixed costs + target income) / Sales c. (Fixed costs + target income) / CM per unit d. (Fixed costs + variable costs) / CM per unit 2. The indifference point is reached when * a. The savings in variable cost is equal to the increase in fixed costs. b. The savings in variable cost is less than the increase in fixed costs. c. The savings in fixed cost is equal to the decrease in variable cost. d. The savings in fixed cost is more than the increase in variable costs.' 3. Which of the following is not an assumption used to prepare a cost-volume-profit graph? * a. Constant sales mix b. Constant cost fluctuations c. Units produced equal units sold d. Liner costs within the relevant range
You are the principal economist at a firm that produces some output y based on the following function: y = f(x1, x2) = x ³ x ² 1. Calculate the marginal product (MP) of both inputs at some arbitrary input bundle (x₁, x₂). Interpret the sign of both. 2. Using your answer in the previous part, calculate OMPT₂/0x₁. Interpret what this means. 3. Calculate the technical rate of substitution between ₁ and x2, i.e., MP/MP₂. 4. Does this production function exhibit increasing, decreasing, or constant returns to scale? Show. 1 5. Lay out a brief, realistic example of x₁, x2, y that fits the dynamics that you calculated.
Within the relevant range: Select one: O A. variable cost per unit decreases as production decreases. O B. fixed cost per unit increases as production decreases. O C. fixed cost per unit decreases as production decreases. O D. variable cost per unit increases as production decreases.
If only the selling price per unit of a product increases (variable cost per unit and total fixed costs do not change), does the breakeven point increase or decrease? Using Break Even Analysis, provide a unique mathematical example to support you
Which of the following describes the behavior of the fixed cost per unit? a.remains constant with changes in production b.decreases with decreasing production c.decreases with increasing production d.increases with increasing production
Suppose the representative firm of the economy has a production function of the form F(K, N) =AK0.5N 0.5 . The marginal product of labor is then given by MP N = 0.5AK0.5N −0.5 . The current capitalstock is K = 40. (a) Holding fixed capital at 40, draw a graph of output as a function of labor. What are some importantfeatures of this graph? (b) If A = 4 what is the Labor Demand Curve, ND(w), as a function of the real wage w? (c) Suppose labor is supplied inelastically with NS(w) = 10. What is the equilibrium wage w, employmentlevel N, and full employment output Y ? (d) Suppose that productivity unexpectedly increases to A = 6. What is the new equilibrium wage w,employment level N, and full employment output Y ?
Which of the following cost behavior assumptions is true? (You may select morethan one answer.)a. Variable costs are constant if expressed on a per unit basis.b. Total variable costs increase as the level of activity increases.c. The average fixed cost per unit increases as the level of activity increases.d. Total fixed costs decrease as the level of activity decreases
Which of the following describes the behavior of the fixed cost per unit? Group of answer choices remains constant with changes in production decreases with increasing production increases with increasing production decreases with decreasing production
Consider a product market with three consumers A, B and C with demand function PA = 6 – QA, PB = 6 – 2QB and PC = 12 – QC respectively, where P is the price in dollars and QA, QB and QC are the quantities demanded by Consumer A, B and C respectively. The marginal cost of the product is constant at $4. (i) If the product is public good, analyse the product and determine the optimal quantity of the product in the market.(ii) How will your answer be different if the product is a private good instead? (Hi there, may I requst for a detailed step by step explanation as i struggle with this topic. Thank you)
Consider a product market with three consumers A, B and C with demand function PA = 6 – QA, PB = 6 – 2QB and PC = 12 – QC respectively, where P is the price in dollars and QA, QB and QC are the quantities demanded by Consumer A, B and C respectively. The marginal cost of the product is constant at $4. (i) If the product is public good, analyse the product and determine the optimal quantity of the product in the market.(ii) How will your answer be different if the product is a private good instead?
2. What effect could be the following changes, occurring independently, have on (1) contribution margin, and (ii) expected profit. D. An increase in fixed costs. E. An increase in wages rates applicable to direct, strictly variable labour. F. An increase in the selling price of the product. G. An increase in production volume. A

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