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Why would a profit-maximizing firm expand the use of each input until its marginal revenue product equals the price of the input?
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- A manager hires labor and rents capital equipment in a very competitive market. Currently the wage rate is $12 per hour and capital is rented at $8 per hour. If the marginal product of labor is 60 units of output per hour and the marginal product of capital is 45 units of output per hour, is the firm using the cost-minimizing combination of labor and capital? If not, should the firm increase or decrease the amount of capital used in its production process?To minimize costs in the short run, a firm should operate where which of the following optimizing conditions is true? Marginal productivity of labor is at a maximum Marginal product relative to own price of every input is equal Marginal revenue product of the variable input equals its marginal costWhat effect will a reduction in commodity price have on the input demand curve of the firm
- Roland Umbrellas has a production function given by Q = L0.5K0.5. The wage (W) is $80 per day and the rental per unit of capital (R) is $5 per day. In the long run, how many units of capital will Roland want to buy for each unit of labor?How does any one economic variable respond to changes in another? Why would a profit-maximizing firm expand the use of each input until its marginal revenue product equals the price of the input?Which of the following statements is false?A firm’s costs are usually higher in the long run than in the short run.To maximize profits, firms must minimize costs.An isocost line is a graph of every possible combination of inputs that yields the same cost of production.An input demand function is a function that describes the optimal factor input level for every possible level of output.
- Suppose a firm has the following expenditures per day: $250 for wages and salaries, $50 for materials, $60 for equipment, and $40 for rent. The market wage for the manager is $120 per day but the owner-manager does not draw a salary. Assume the daily revenue is $420. What is the accounting profit for the firm described above? Just give equation formula.A firm's technology is characterized by a Cobb - Douglas production function of the form 1 1 y = f(K,L) = 2K² + 1² a. The output price is p, and the input prices are r and w for K and L, respectively. Set up the problem for a profit - maximizing firm and solve for the factor demand functions for K and L. b. Find the firm's supply function. c. Find the firm's profit function. d. Assume now that p = 2, r = 1, and w = 1. Using the functions you have found in parts (a), (b) and (c), calculate the profit - maximizing levels of the factors and (K* and L*), the profit - maximizing output level (v) and the maximum profit of the firm (). Please solve it by explaining and explaining.A perfectly competitive firm has the following input requirement set v(y)(x1, X2): ax+ bx22y}. If the minimum cost of production at wi=w2=1 is equal to 6, what is y equal to? What can you say about the elasticity of substitution for this production function?
- What is the difference between the factor demand derived from cost minimization and that obtained from the profit maximization? Under what conditions they can be the same?The production function of a competitive firm is described by the equation y = 2x11/2 6x21/2. The factor prices are p1 = $3 and p2 = $4 and the firm can hire as much of either factor it wants at these prices. What is the firm’s marginal cost?The production function of a competitive firm is described by the equation y = 1/2, 1/2 2.x26x. The factor prices are pi $3 and P2 $4 and the firm can hire as much of either factor it wants at these prices. What is the firm's marginal cost?