ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
expand_more
expand_more
format_list_bulleted
Question
Suppose that the production function takes the form X = min(10L, 5K) and that a competitive firm faces a wage rate of £60 per week and a weekly capital rental of £32.
(a) How much must the firm spend to produce 100 units of output, and what is the average cost of production when X = 100?
(b) What is the incremental cost of producing the 101st unit of output?
(c) What happens to the cost of producing 100 units of output if the wage rate and the rental cost of capital rise by 25 per cent each? What happens to the average and marginal cost?
(d) What happens to the cost of producing 100 units of output if the wage rate increases by £1, or if the cost of capital increases by £1?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by stepSolved in 5 steps with 18 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- You are given a cost function of TC(Q)= 10,000+ 20 Q Assume Q = 500, initially. What higher Q would cause average cost to be reduced by 25%? a. 1,000 c. b. 2,000 d. 700 600arrow_forwardTen-year old Sarah is starting a lemonade stand, she uses baskets of lemons (L) and other ingredients (O). She is able to produce lemonade according to the production function f(L, O) = 1 2 L 2O. The cost of a basket of lemons is $10 and the average cost of the other goods is $4. (a) Derive MPL and MPO. (b) Currently Sarah is using 4 baskets of lemons and 40 units of the other goods. Using this information, calculate MPL and MPO. (c) True/False. At her current use of inputs Sarah is minimizing costs. If true, explain why. If false, what would you recommend Sarah do? (d) Sarah wants to produce 320 units of lemonade. Determine the cost minimizing combination of inputs to use. (e) Assuming no changes in the market price of lemonade nor in the prices of the inputs, if Sarah continues to produce 320 units of lemonade in the long run, what will Sarah’s long run costs be.arrow_forwardproduction function is Q = An orange grower has discovered a process for producing oranges that requires two inputs. The min{2x1, x2}, where x₁ and x2 are the amounts of inputs 1 and 2 that he uses. The prices of these two inputs are w₁ = 5 and w₂ = = 2, respectively. The minimum cost of producing 140 units is (a) $980 (b) $630 (c) $1400 (d) $280 (e) $700arrow_forward
- If the Marginal Cost for a product is found to be MC= 8x+60 , and the Marginal Revenue is given as MR= 1200 and the cost of 8 units is found to be $1600, what are: the Total Costs? the Fixed Costs? the Total Profit? the production level, x, that yields Maximum Profit? the corresponding Maximum Profit?arrow_forwardWhich cost concept is used to determine the most cost-efficient level of production? a) Average cost b) Total cost c) Marginal cost d) Variable costarrow_forwardA firm's production function can be written as:Q = 5LKwhere Q represents output per day. The unit costs of inputs are $150 for labor (L) and$1,000 for capital (K). Determine the least cost combination of L and K when output isproduced at the rate of 1,000 tons per day. Determine the required outlay for 1,000 tons perday.arrow_forward
- Consider the following total revenue function for a hammer. R 44x 0.01x2 (a) The sale of how many hammers, x, will maximize the total revenue in dollars? x = 2200 hammers Find the maximum revenue. $48400 (b) Find the maximum revenue if production is limited to at most 1200 hammers. $ If the total revenue function for a computer is R(x) = 1000x - 35x2-x³, find the level of sales, x, that maximizes revenue and find the maximum revenue in dollars. x = R(x) = $ computers If the total cost function for producing x lamps is C(x) = 3240 + 37x+ 0.9x2 dollars, producing how many units, x, will result in a minimum average cost per unit? units Find the minimum average cost per unit. $ If the total cost function for a product is C(x) = 10+ 0.1x2 dollars, producing how many units, x, will result in a minimum average cost per unit? x= units Find the minimum average cost per unit. $ Find the derivative of the function. f(x) = ex-xearrow_forwardNonearrow_forwarda) Calculate the marginal product (MP1) for the mixers. Does the production function have increasing, decreasing, constant marginal product for the mixers? b) Suppose in the short run the amount of machines she has is fixed at 27. How many mixers should she use? How many baklavas will she produce? How much profit will she make? c)Usinag an isoprofit, as well as the production function, draw a diagram of your soltuion from part (b). carefully label all the slopes and intercepts. d) In the long run, how many mixers should she use? How many machines? How many baklavas will she make? e) Suppose that the government decides to provide a $1 subsidy per mixer. What is the profit-maximizing amount of input to use now?arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education