ECON 1123 Study Guide - Midterm Guide: Marginal Revenue, Marginal Product, Demand Curve

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emeraldarmadillo381

9 Oct 2014

School

University of Oklahoma

Department

ECON

Course

ECON 1123

Professor

Hannah Holmes

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Document Summary

Mc is minimized: why does diminishing marginal product of labor occur, as you add more and more labor. You put too much labor on too few fixed inputs. 5 assumptions of perfect competition: firms maximize profits, firms will produce at mr=mc i. ii. If mr0, new firms enter to increase market supply and push price down. If <0, some firms leave to decrease market supply and push price up. Economics of scale: receive discounts on inputs purchased in bulk, cheaper borrowing rates.

Related Questions

Production/Cost Exercises 1. The following is a short-run production table for a firm with labor as its only variable input. Wage = $ 310 Capital = 100 Capital Price= $20 Product Price= $65

Labor Output

0 0

1 50

2 110

3 160

4 200

5 230

6 250

7 260

8 265

9 260

10 250

A. Determine the following measures at all levels of output: MPL, APL, TFC, TVC, TC, TR, AVC, ATC, AFC, MC, PROFIT.

B. At what level of output is the profit maximized?

C. What kind of observations can you make about MC, price, average total cost, and profit?

ceruleanmosquito986

Q1) Soundscape Enterprises manufactures Sonoblast, a device that produces a high-pitched reminder to telemarketers that they have once again disturbed you just when you were sitting 1â2 down to dinner. The production function for Sonoblasts is given by the formula Q = 2KL where Q is in units of output per period, K is in machine-weeks per period, and L is in labour- weeks per period. The machine rental rate r is $512 per machine-week and the wage rate w is $128 per labour-week. In the short run, K is fixed at 4 machine-weeks per period.

a. Give the formulas for the short-run production function and the marginal product of labour (MPL) function.

b. Express variable cost (VC), total cost (TC), and marginal cost (MC) as functions of L and as functions of Q; and average variable cost (AVC), average fixed cost (AFC) and average total cost (ATC) as functions of Q.

c. At what level of Q is ATC minimized? What are the values of ATC and of MC at this level of output?

d. If K is increased to a fixed 16 units, at what level of Q is ATC minimized, and what are the values of ATC and of MC at this level of output?

e. In the long run, with all inputs variable, what is the optimal K/L ration with input prices unchanged? How many units of L and of K would be required to produce the levels of output in 1c and in 1d and what is the average cost of producing Sonoblasts in each case? Explain the relation between your results here and those for 1c and 1d.

lilacchinchilla474

Use the following information on a hypothetical short-run production function to answer questions A-C.

The price of labor is $20 per day.

Ten units of capital are used each day, regardless of output level.

The price of capital is $50 per unit.

(A). Calculate the marginal product (MP) and average variable product (AP) of each unit of labor input.
(B). Calculate total (TC), average total (ATC), average variable (AVC), and marginal costs (MC).
(C). Can you tell where diminishing marginal returns sets in?

Labor (L)	Output (Q)	MP	AP	TC	ATC	AVC	MC
5	120	--					--
6	140
7	155
8	165
9	168

harlequinotter496

ECON 1123 Study Guide - Midterm Guide: Marginal Revenue, Marginal Product, Demand Curve

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