ECON 1000 Lecture Notes - Lecture 18: Marginal Product, Marginal Cost, Production Function

70 views2 pages

cerisegiraffe538

8 May 2017

School

Department

Course

Professor

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

Document Summary

Econ 1000 week 10 lecture 18. Supply is all based around the costs of supply. Costs are based on the production of apples. Costs depend on relationship of inputs and outputs for products. Production function: mathematical relationship for outputs and inputs: q (quantity of apples produced) l (labour) n (natural resouces, f means depends on , q = f (l,n) Short run production function, in short run you can vary labour and land. In long run, you can vary labour, land and products. Average product of labour is : q / l. Marginal product of labour is: change in q / change in labour. Slopes of the entire production is the average production of labour, slopes of a given point is the marginal production of labour. Marginal product of labour diminishes as number of workers increases, because your workplace can get over crowded or there isn"t enough work. Short run production function is when land and resources remains constant.

Related Questions

You manage a plant that mass-produces engines by teams of workers using assembly

machines. The technology is summarized by the production function

q = 5 KL

where q is the number of engines per week, K is the number of assembly machines, and L

is the number of labor teams. Each assembly machine rents for r = $10,000 per week, and

each team costs w = $5000 per week. Your plant has a fixed installation of 5assembly machines as part of its design.

In the SHORT RUN:

For any given level of output q, write the expression for the number of Labor teams required.

b. What is the cost function for your plant ï¿½ namely, how much would it cost to produce q engines? (Hint: TC=TFC+TVC, TFC=rK, TVC=wL)

c. What are average and marginal costs for producing q engines? How do average costs vary with output?

d. How many Labor teams are required to produce 250 engines? What is the average cost per engine?

In the LONG RUN:

e. You are asked to make recommendations for the design of a new production facility. What capital/labor (K/L) ratio should the new plant accommodate if it wants to minimize the total cost of producing at any level of output q? MPL=5K, MPK=5L.

f. For output q=500, how many L and K should you use in order to minimize cost?

g. What is the minimum cost of production for q=500?

h. What is the minimum cost of product for any output q? (Note: write TC as a function of q).

i. If w is increased to $10,000 per week, how does this change the capital/labor (K/L) ratio if you want to minimize the total cost of production?

j. Given the new wage rate, how many L and K should you use in order to minimize cost for output q=500?

k. Is the expansion path a straight or a curved line? Is it upward or downward sloping? Why?

The law of eventually diminishing marginal returns: (Points : 1)

a. states that each and every increase in the amount of the variable factor employed in the production process will yield diminishing marginal returns.
b. is a mathematical theorem that can be logically proved or disproved
c. is the rate at which one input may be substituted for another input in the production process
d. None of the above

The marginal product is defined as: (Points : 1)

a. the ratio of total output to the amount of the variable input used in producing the output
b. the incremental change in total output that can be produced by the use of one more unit of the variable input in the production process
c. the percentage change in output resulting from a given percentage change in the amount of the variable input X employed in the production process with Y
d. None of the above

The rate at which one input X may be substituted for another input Y in a production process, while total output remains constant, is: (Points : 1)

a. the slope of the isoquant curve
b. the marginal rate of technical substitution

c. equal to MPx/MPy

d. all of the above
e. none of the above

Marginal revenue product is: (Points : 1)

a. defined as the amount that an additional unit of the variable input adds to the total revenue
b. equal to the marginal factor cost of the variable factor times the marginal revenue resulting from the increase in output obtained
c. equal to the marginal product of the variable factor times the marginal product resulting from the increase in output obtained
d. a and b
e. a and c

Marginal factor cost is defined as the amount that an additional unit of the variable unit of the variable input adds to ____________. (Points : 1)

a. marginal cost
b. variable cost
c. marginal rate of technical substitution
d. total cost
e. none of the above

In the Cobb-Douglas production function Q=aL^?1.K^?2 ______________. (Points : 1)

a. the marginal product of labor (L) is equal to ?1
b. the average product of labor (L) is equal to ?2
c. if the amount of labor input (L) is increased by 1 percent, then output will increase by ?1 percent
d. a and b
e. a and c

The short-run cost function is: (Points : 1)

a. where all inputs to the production process are available
b. relevant to decisions in which one or more inputs to the production process are fixed
c. not relevant to optimal pricing and production output decision facilities
d. crucial in making optimal investment decisions in new production facilities
e. none of the above

Theoretically, in a long-run cost function: (Points : 1)

a. all inputs are fixed
b. all inputs are considered variable
c. some inputs are always fixed
d. capital and labor are always combined in fixed proportions

A linear total cost function implies that: (Points : 1)

a. marginal costs are constant as output increases
b. average total costs are continually decreasing as output increases
c. a and b
d. none of the above

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

ECON 1000 Lecture Notes - Lecture 18: Marginal Product, Marginal Cost, Production Function

Document Summary

Get access

Related Documents

ECON 1000 Chapter Notes - Chapter 18: Marginal Product, Demand Curve

ECON 1000 Lecture Notes - Lecture 17: Fixed Cost, Profit Maximization, Longrun

ECON 1000 Chapter Notes - Chapter 18: Marginal Product, Marginal Revenue, Demand Curve

Related Questions