ECO100Y5 Chapter Notes - Chapter 8: Marginal Product

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Chapter 8 reading notes in the long run, there are numerous ways to produce any given output. Only when it is equal that you can use the cost minimizing method. profit maximizing firms adjust the quantities of factors they use to the prices of the factors givne by the market. Since all costs are variable in the long run, we don"t need to distinguish among avc, afc, atc. In the long run, there is only one lrac for any given set of input prices: when lrac falls as output rises, the firm is said to have economies of scale. : a situation in which output increases more than in proportion. All available constant returns is increased. a firm in this situation is a constant cost firm. : a situation in which output increases in proportion to inputs as the scale of production decreasing returns a firm"s production increases. a firm in this situation is an increasing-cost firm.

Related Questions

Use the following information to answer the next 3 questions.

The total cost (TC) of producing output (Q) is: TC = 200 + 5Q

8. The fixed cost is

9. The marginal cost is 10. The average total cost is

11. If the wage rate is $20 per hour and the cost of capital is $25 per hour, then the slope of the isocost curve will be

a) 25/20

b) 1/25

c) 4/5

d) Â¼

12. The total cost of producing a given level of output is

a) Achieved when inferior goods are involved

b) Minimized when MP_k/P_k = MP_L/P_L

c) The two inputs are superior

d) All of the above

13. Say P_K =10 and P_L = 20 and the producerâs total budget is $100. What is the equation of the budget line?

a) PL + PK = 20

b) 100 = P_K + P_L

c) 100 = 20L + 10K

d) 100 = 10L + 5K

14. Deadweight loss refers to

a) Loss of consumer surplus because of government regulations

b) Losses due to labor unions

c) Net loss of consumer and producer surplus

d) Producers seeking excessive profits

15. An effective price ceiling causes a loss of

a) Both consumer and producer's surplus

b) Producer's surplus only

c) Neither producer nor consumer surplus

d) None of the above

16. Import tariffs generally result in

a) Higher domestic prices

b) Less consumer surplus

c) Higher producer surplus for domestic producers

d) All of the above

chocolatetiger708

The long-run production function for a rm's product is given by q = f(K; L) = 5 K L. The price of capital is $10 and the price of labor is $15.
a. Suppose the rm wishes to produce output of 500. List 5 combinations of capital and labor that the rm can transform into 500 output.
b. For each of your 5 combinations from part a, give the cost of using that combination of capital and labor. Which is the lowest?
c. For your lowest cost combination from part b, calculate the marginal product of capital (MPK) and the marginal product of labor (MPL).
d. For your answer in parts b-c, is your marginal product per dollar equal across the two inputs.

taupeduck74

A price taking firm chooses its inputs to maximize short-run profits. Its Cobb-Douglass production function has the following form: q(L, K) = L^(1/2) K ^(1/3) . The output price is 1,000 per unit and the cost of each unit of input is 10. In the short-run, capital is fixed at 27 units.

(a) Set up the profit function in terms of labor only.

(b) Find the optimal choice of labor, L â .

Another price taking firm chooses its inputs to maximize long-run profits. Labor and capital are substitutes in production and both exhibit decreasing returns to scale, q(L, K) = L^(1/2) + K^(1/2) . The output price is 100 and the price of each of the inputs is 10.

(a) Set up the firmâs profit function and provide the two conditions for profit maximization.

(b) Find the profit maximizing levels of capital and labor.

rosearmadillo753

ECO100Y5 Chapter Notes - Chapter 8: Marginal Product

ECO100Y5 Full Course Notes

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