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Chapter 5 Solution.pdf

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Department
Economics
Course
ECON 3411
Professor
All Professors
Semester
Fall

Description
Chapter 05The Production Process and CostsChapter 5 Answers to Questions and Problems1075025a When K81 and L16 Q811654 Thus APQL5416L0750253375 When K81 and L256 Q81256274108 Thus AP L 108810422 0753434b The marginal product of labor is MP1481L274L When L3434L16 MP274160844 When L81 MP27481025 LLThus as the number of units of labor hired increases the marginal product of labor decreases MP160844025MP81 holding the level of capital LLfixed c We must equate the value marginal product of labor to the wage and solve for L 3434Here VMPPMP200274L1350L Setting this equal to the LL34wage of 50 gives 1350L50 Solving for L the optimal quantity of labor is L812 See Table 51 1 2 3 4 5 6 7 Marginal Average Average Value Marginal Product of Product of Product Product of Capital Labor Output Capital Capital of Labor Capital MPAPAP VMPK K L K 0 20 0 1 20 50 50 50 250 200 2 20 150 100 75 750 400 3 20 300 150 100 15 600 4 20 400 100 100 20 400 5 20 450 50 90 2250 200 6 20 475 25 7917 2375 100 7 20 475 0 6786 2375 0 8 20 450 25 5625 2250 100 9 20 400 50 4444 20 200 10 20 300 100 30 15 400 11 20 150 150 1364 750 600Table 51a Labor is the fixed input while capital is the variable input b Fixed costs are 2030600 c To produce 475 units in the leastcost manner requires 6 units of capital which cost 25 each Thus variable costs are 256150 512014 by McGrawHill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied scanned duplicated forwarded distributed or posted on a website in whole or part
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