Microeconomics (7th Edition)
Microeconomics (7th Edition)
7th Edition
ISBN: 9780134737508
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 17, Problem 17.6.4PA

Subpart (a):

To determine

Calculation of Marginal product of capital, total revenue, marginal revenue product of capital, and the additional profit from renting one more capital.

Subpart (b):

To determine

Calculation of Marginal product of capital, total revenue, marginal revenue product of capital, and the additional profit from renting one more capital.

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Prunella raises peaches where L is the number of units of labor she uses and T is the number of units of land she uses. Her output is f(L,T) = LT bushels of peaches. Currently, the cost of land is 8, the wage for labor is 9, and the price of peaches is 10. Prunella is currently maximizing her profits. Which occurences would cause the quantity of labor used to decrease? O An increase in the price of peaches O A increase in the price of labor O An increase in the Marginal Product of Labor O All of the above
4. Ariel's T-shirt company hires labor at a rate of $8 per hour and rents capital (sewing machines) at a cost of $128 per machine per day. Throughout this question, you can think of Ariel renting fractions of sewing machines if necessary. Her production function is given by q = 6LK where q measures the number of T-shirts produced each day, L measures the total number of hours worked by all employees in a day and K measures the number of sewing machines. (a) Using the Lagrangian technique, find the cost-minimizing combination of labor and capital for the production of q T-shirts per day. (b) Write down an equation for Ariel's long-run expansion path. (c) Find Ariel's long-run total, average, and marginal cost as a function of the number of T-shirts she produces each day. (d) Sketch Ariel's long-run total expansion path in a diagram. Sketch at least two isoquants with the associated isocost lines. Using your diagram, determine how Ariel's long-run expansion path will shift if the cost of…
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Chapter 17 Solutions

Microeconomics (7th Edition)

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