Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Chapter 7, Problem 1.2CE
To determine
To evaluate whether the coefficient of capital and labor are statistically significant.
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Is it possible to increase the labor productivity (output per unit of labor) in a given production process which exhibits diminishing returns to labor? If so, how?
True or false
The law of diminishing returns implies that the marginal product of labor (MPL) is increasing as labor input increases.
Explain the difference between diminishing total returns and diminishing marginal returns to labor.
Chapter 7 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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- Let be a production function. The average product of factor L (labour force) is equal to:arrow_forwardWhich of the following is an example of a physical capital investment for a manufacturing company? A Hiring floor technicians B D Purchasing acres of land for construction Buying new machines for production Hiring accountantsarrow_forwardIf the production function for a company is given by z = 360x^2/5 y^1/3 , where x is the company’s capital investment and y is the number of work-hours for the labor force, find the marginal productivity of x.arrow_forward
- An increase in the price of capital will demand for labor if capital and labor are substitutes, and it will the demand for labor if the scale effect dominates. increase; decrease decrease; increase increase; increase decrease; decreasearrow_forwardThe Production Function assumes that the marginal product of capital is always increasing all workers are different the level of capital stock is not measurable all workers are alikearrow_forwardA production function is represented by P=f(L), where L is labour. As input L increases, the total output will increase but what will happen to marginal product? Can marginal product be zero? if so, what it meanarrow_forward
- Technological progress decreases the marginal product of labor if a new input is developed that is complementary with labor. True Falsearrow_forward“My friend, Mike, is a CPA and owns his own tax business. During tax season, he hires additional workers. Would you expect Mike’s office to experience diminishing marginal product of labor? Would you expect diminishing marginal product of capital? Why or why not?”arrow_forwardTwo points, A and B, are on an isoquant drawn with labor on the horizontal axis and capital on the ver- tical axis. The capital-labor ratio at B is twice that at A, and the elasticity of substitution as we move from A to B is 2. What is the ratio of the MRTSL, K at A versus that at B?arrow_forward
- Does additional input of labor entail a steady increase in the output of a firm? Why or Why not?arrow_forwardAssuming labor is the only variable factor and paid at a constant wage rate ? show that the average variable cost (AVC) is inversely related to productivity?arrow_forwardQuadratic Production Function Estimate a quadratic production function where Q = output; L = labour input; K = capital input. Is the estimated production function “good”? Why or why not? Cobb-Douglas Production Function Estimate the Cobb-Douglas production function Q= ¼ αLβ1Kβ2, where Q = output; L = labour input; K = capital input; and α, β1, and β2 are the parameters to be estimated. For the Cobb-Douglas production function, test whether the coefficients of capital and labor are statistically significant. For Cobb-Douglas production function, determine the percentage of the variation in output that is explained by the regression equation. For Cobb-Douglas production function, determine the labor and capital estimated parameters, and give an economic interpretation of each value. Determine whether this production function exhibits increasing, decreasing, orconstant returns to scale. (Ignore the issue of statistical significance.)arrow_forward
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