Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 16, Problem 3RQ
To determine
The reason for the shift of demand for capital.
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Can a firm have a production function that exhibits increasing returns to scale, constant returns to scale, and decreasing returns to scale as output increases? Discuss.
O A. No. The functional form of the production technology dictates the type of returns to scale it exhibits. While a production function can exhibit both increasing
returns and constant returns to scale at different levels of output, increasing returns and decreasing returns to scale are mutually exclusive.
O B. Yes. At low levels of output, specialization leads to increasing returns to scale. Once specialization has been exhausted, proportional increases in all inputs
lead to constant returns to scale. And finally, for large scale operations, logistical and bureaucratic problems can lead to decreasing returns to scale.
O C. No. The functional form of the production technology dictates the type of returns to scales it exhibits, and there will only be one of the three types of returns to
scale exhibited throughout the…
Let's assume that a firm produces 60 products. Its total weekly cost (TC) at this output
is $2,100. This includes TVC and TFC. We also know that the firm employs 3 part-
time workers at a wage cost of $600 per worker per week. This is the firm's only
variable cost (TVC). What is the firm's average fixed cost (AFC) at this output?
O $2.50.
O $2.
O $5.
O $100.
O $10.
Let's assume that a firm's total weekly costs are as follows: 1. Salaries of hired workers
$5,000. 2. Supplies = $1,000. 3. Rent = $600, 4. The owners have invested a certain
amount of their own money into the business. This could have earned them interest of
$200 per week if they had chosen to put it into a bank instead of investing it into their
business. 5. The value of the owner's time is estimated to be $800 per week. What are
the firm's total economic costs?
O $6.000
O $7.600.
O $900.
$7.500.
O $6.700.
acroeconómic Policy and Natural Resources (10)|| Sp
Time left 1:23:57
estion
When a par ar firm is fully utilizing its capital, its output is given by Y = 10 × LO5. The cost of labour is OMR1 per
unit. To maximize profit, how many units of labour should this firm use?
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O a. 50
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O b. 100
О с. 5
O d. 25
O e. 3.16
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