Log in
HomeClass Notes1,200,000CA670,000

ECO100Y5 Lecture 7: Lecture 7 - October 24, 2017

24 views2 pages
pearrabbit974
10 Dec 2017
School
UTM
Department
Economics
Course
ECO100Y5
Professor
Zachary Mahone

For unlimited access to Class Notes, a Class+ subscription is required.

sophiapham192 and 37296 others unlocked
ECO100Y5 Full Course Notes
53
ECO100Y5 Full Course Notes
Verified Note
53 documents

Document Summary

2 assumptions about firms: firms are assumed to be profit-maximizing entities, each firm is assumed to be a single, consistent decision-making unit. 4 factors (inputs) of production: intermediate products: inputs that are outputs from another firm, land: inputs provided directly from nature, labour, capital: inputs that are services of physical capital (like equipment). An equation that shows the maximum output that can produced given a combination of inputs. In other words, the technological relationship between inputs used & outputs produced: average product: ap= # (cid:2925)(cid:2916) v(cid:2911)(cid:2928)(cid:2919)(cid:2911)(cid:2912)(cid:2922)(cid:2915) i(cid:2924)(cid:2926)(cid:2931)(cid:2930) (cid:4666)(cid:2922)(cid:2919)(cid:2921)(cid:2915) l(cid:2911)(cid:2912)(cid:2925)(cid:2931)(cid:2928)(cid:4667: marginal product: : mp=c(cid:2918)(cid:2911)(cid:2924)(cid:2917)(cid:2915) (cid:2919)(cid:2924) t(cid:2925)(cid:2930)(cid:2911)(cid:2922) (cid:2900)(cid:2928)(cid:2925)(cid:2914)(cid:2931)(cid:2913)(cid:2930) 2 & 3 are the technology! f(cid:4666)k,l(cid:4667)=(cid:884)k+(cid:885)l f(cid:4666)k,l(cid:4667)=k l1 . Total, average & marginal product: total product: the total amount produced given a time period. We assume marginal & average product initially increases as variable inputs are increased due to specialization that comes from division of labour. The maximum point is where the average & marginal product intersects.

Get access

Grade+
$40 USD/m
Billed monthly
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related Documents

ECO100Y5 Chapter Notes - Chapter 7: Marginal Product, Fixed Cost, Average Variable Cost
orangezebra23
ECO100Y5 Chapter Notes - Chapter 7: Risk-Free Interest Rate, Opportunity Cost, Fixed Cost
ceruleansnail611
ECO100Y5 Lecture Notes - Lecture 18: Fixed Cost, Variable Cost, Longrun
silvercockroach865

Related Questions

1. Identify the returns to scale for each production function.

a) f(K,L) = (K^1/4)*(L^2/3) 

b) f(K,L) = 3K+2L 

c) f(K,L) = min(3L,4K) 

d) f(K,L) = 2*((K^1/5)*(L^4/5)) 

e) f(K,L) = (2K^2)+L^2

A firm produces output according to a production function:

Q = F(K,L) = min {2K,2L}.

a. How much output is produced when K = 2 and L = 3?




b. If the wage rate is $65 per hour and the rental rate on capital is $35 per hour, what is the cost-minimizing input mix for producing 4 units of output?

Capital:
Labor:


c. How does your answer to part b change if the wage rate decreases to $35 per hour but the rental rate on capital remains at $35 per hour?

Capital and labor increase.
Capital decreases and labor increases.
It does not change.
Capital increases and labor decreases.

For each of the following assertions, please indicate whether they are true or false. No credit will be given without an explanation as to why your claim is correct.

(a) (4 points) There are two firms: one has production function f (K, L) = K + L and the other has production function f?(K,L) = (K+L)2 ?50. Assertion: These two firms have the same shaped isoquants, but different technology.

(b) (4 points) Assertion: In the short run, if the marginal product of labor curve is decreasing, then it is below the average product of labor curve.

(c) (4 points) A T-shirt company can make 1000 T-shirts with 2 workers and 1 machine. It continues to make 1000 T-shirts if it has more than 2 workers but only 1 machine or 2 workers and more than 1 machine. The company currently produces 1000 shirts per month for its single customer. The price of capital falls, but the firm must still produce 1000 shirts per month. Let all inputs be variable. Assertion: The firm will not hire or fire any workers.

(d) (4 points) A technology firm has a Cobb Douglas production function and measures the marginal rate of technical substitution (MRTSLK) at MPL/MPK = 3. The prices of labor and capital faced by the firm are such that currently W/R = 2. Assertion: The tech firm can lower costs (holding output fixed) by laying off some of its labor force and using more capital.