ECO200Y1 Lecture Notes - Lecture 13: Kosovo Force, Isoquant, Substitute Good

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salmonmosquito138

26 Jun 2018

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ECONOMICS 200

Lecture Assignment #13

Theory of the Firm: Productivity Functions

Source: BB, Chapter 6

Background

We have just completed Consumer Theory (associated with the demand side of a market

economy). Now we move to Production Theory (associated with the supply side of the

economy).

Of course, we need eventually in this second half of the course to bring demand and

supply together to analyze market price and quantity.

1. The Production Relationships (Review of ECO 100)

1.1 What is a Production Function?

1.2 Consider the typical production function for a single output made from two

inputs, capital (K) and Labour (L) of the form q = q(K, L). Define these time

periods:

•very short run

•short run

•long run

•very long run.

1.3 Define these productivity concepts in the short run where K is fixed:

- Total Product of Labour (TPL)

- Average Product of Labour (APL)

- Marginal Product of Labour (MPL)

1.3 Assume that MP first rises, then falls (can you give an explanation of why this

might occur?). Now plot TPL, APL, MPL.

1.4 What is the “law of diminishing returns”? (The BB text uses the term “law of

diminishing marginal returns”).

1.5 What is the relationship between APLand MPL? Put another way, what can you

say about MPLwhen APLis rising / falling / constant?

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ECO200Y1 Full Course Notes

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Document Summary

We have just completed consumer theory (associated with the demand side of a market economy). Now we move to production theory (associated with the supply side of the economy). Of course, we need eventually in this second half of the course to bring demand and supply together to analyze market price and quantity. Consider the typical production function for a single output made from two inputs, capital (k) and labour (l) of the form q = q(k, l). Define these time periods: very short run short run long run very long run. Define these productivity concepts in the short run where k is fixed: Assume that mp first rises, then falls (can you give an explanation of why this might occur?). 1. 4 what is the law of diminishing returns ? (the bb text uses the term law of diminishing marginal returns ).

Related Questions

A cost-minimizing firm has the following short-run production function:
Q=f (L,K)=72L+5L²-0.2L³

a) Briefly explain why this is a short-run production function.

b) At what level of employment would be diminishing returns set in for the variable input?

c) Fin the levels of employment that define stage two in the production process.

d)If the market-determined real wage rate is $20 determine the amount of labor a cost-minimizing firm would hire in order to minimize the total cost of production.

2) a) Briefly explain the concept of "Return to scale". What form of "Return toScale" does the following production function exhibit? Explain

b) Q=f(L,K)=L^0.3 K^0.7

Suppose a cost-minimizing firm wishes to change its scale of production and needs to know the combination of labor and capital to employ. If the first's total cost outlay is $14. Fin this combination using the information below and given that the prices of labor and capita are $1 and $3 per unit respectively.

Q= 0 1 2 3 4 5 6 7 8

TPI=0 11 20 28 35 41 45 46 46.5

TPK=0 24 45 63 78 87 93 96 97

where TPI AND TPK represent the total product of labor and total product of capital respectively.

3) Given the demand and supply schedules for semiconductors in a perfectly competitive market:

Q_d=60-10P+0.5I, Q_s=-10+4P-2C

Where I=average income of the demanders of this production

C=unit cost of the inputs used in the production of this commodity.

a) Find the expression for equilibrium price and equilibrium quantity transcended in this market.

b)Find the initial equilibrium and equilibrium quantity ifI=1000 and C=20

c) Determine the impact of an increase in income from 1000 to1200 on the initial equilibrium values.

d) Assume that an improvement in the technology of producing this commodity results in an increase in supply by a factor of 5, how will this development affect the initial equilibrium values?0

roseant382

Any help with any of these items would be amazing...thanks in advance

1. Explain the difference between the change in Supply and change in quantity supplied. Draw a diagram of the two changes and provide an example.

2.Draw, label and describe the 5 elastic measures-provide an examble of each.

3. Carefully draw, label and explain the Total Utility vs. Marginal Utility curves on a diagram. How do we define equilibrium in Utility Theory?

4. Indifference Curves: Carefully draw, label and expalin the budget line vs. indifference consumption curve and show equilibrium.

5. Describe the following Production Cost Terms: The short run, the long run, the very long run, implicit costs, explicit costs, acounting profits, economic profits.

6. Draw the profit max diagram of a monopoly and perfect competition. Compare and contrast both diagrams.

7. Just recently google was found not guilty in a major anti-trust case. Was googel 1. attempting to monopolize a market? 2.Attempting to become the oligopolisitc leader or 3. just engage in fair competition. Explain each concept carefully.

8. Summarize the MPP>MPC>MRP rule. How does it explain how your wages are determined? Provide a personal example.

9. Dogs kept in a backyard and are barking constantantly are notorious in most city neighborhoods. Do these dogs pose a negative or positive externality? What (if anything) should the city do about these externalities?

10. Dr. Joseph Stiglits, Nobel Economist, recently published "The Price of Inequality". In the book, he states the gap between the very wealthy and eeryone else has caused our economy to falter, and will continue this trend unless we are able to reverse course. For example, the Median wealth fell by 40% between 2007 and 2010, while the wealthy became wealthier. Is the current economic largess due to our high national debt or the slowdown in consumer spending, please explain.

Type your question here

taupealpaca456

Exam coming up pretty soon and I just need to see the step by step solutions to these problems in order to make sure I am doing them correctly.
Greatly appreciated!

1. Workers in a certain job are trained by the company, and the company calculates that to recoup its investment costs the workersâ wages must be $5 per hour below their marginal productivity. Suppose that after training, wages are set at $5 below marginal productivity, but that developments in the product market quickly (and permanently) reduce marginal productivity by $2 per hour. If the company does not feel it can lower wages or employee benefits, how will its employment level be affected in the short run? How will its employment level be affected in the long run? Explain, being sure to define what you mean by short run and long run!

2. The manager of a major league baseball team argues: âEven if I thought Player X was washed up, I couldnât get rid of him. Heâs in the third year of a four-year, $24 million deal. Our team is in no position to eat the rest of his contract.â Analyze the managerâs reasoning using economic theory.

3. Assume that the labor supply curve to a firm is the one given in Problem 1 above that is, (E=5W). If the firmâs marginal revenue product of labor (MRPL) 240 â 2E, what is the profit-maximizing level of employment (E* ) and what is the wage level (W * ) the firm would have to pay to obtain E *workers?

4. Major league baseball teams scout and hire younger players whom they then train in the minor leagues for a period of three to five years. Very few of their trainees (perhaps 5 percent) actually make it to the major leagues, but if they do they are bound to the team that owns their contract for a period of five years. After five years, the player can become a "free agent" and choose any major league team on which to play.Keeping in mind that the major league teams pay the costs of, but derive no revenues from, their minor league teams, what would be the most important predictable effects of allowing players to become free agents immediately upon entry into the major leagues?

5. A minimum wage will influence different labor markets differently. In four separate market diagrams, illustrate the following cases: (i) a competitive market in which causes a 50% reduction in labor demand; (ii) a competitive market in which the minimum wage does not causes a % reduction in labor demand; (iii) a monopsony market where the minimum wage increases employment; (iv) a monopsony market where the minimum wage decreases employment. (Hint under the monopsony model of minimum wages, the effective marginal expenditure curve has a horizontal range at the level of the minimum wage and then jumps to rejoin the original marginal expenditure curve.)

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ECO200Y1 Lecture Notes - Lecture 13: Kosovo Force, Isoquant, Substitute Good

ECO200Y1 Full Course Notes

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