Does the production function below show constant, increasing, or decreasing returns to scale if the firm increases thequantity of labor and capital used froma. 2L and 2K to 3L and 3K?b. 4L and 4K to 6L and 6K?Required: Provide graphs, solution and assumption.Capital (K)123456137101212102818232828243122833363631Labor (L)414303640403651430364042406122833364039I

In order to check for the increasing , decreasing or constant return to scale , we multiply the…

Answered: Does the production function below show…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter7: Production Economics

Section: Chapter Questions

Problem 8E

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Which costs are measured on per-unit basis: fixed costs, average cost, avenge variable cost, variable costs, and marginal cost?
Do you think that the taxicab industry in large cities would be subject to significant economies of scale? Why or why not?
A firm has the following production function: Q = 9L2/3K1/3 Where Q is output, L is labor and K is Capital. Where Q is output, L is labor and K is Capital. (a) What sort of returns to scale characterize this production function? (b) Derive the marginal product of labor and capital. (c) What do we mean when we say the production function is linearly homogenous?
Problem 3 Belle Company produces and sells rattan baskets. The number of units produced and the corresponding total production costs for six months, which are representatives for the year, are as follows: Months Units Produced Production Costs April May June July 500 700 P4,000 8,000 6,000 7,500 900 600
Units of fixed input K Labor Hours (L) Output (Q) TFC TVC TC AFC AVC ATC MC 3 0 0 90 0 90 0 0 0 0 3 1 4 90 20 110 22.5 5 27.5 5 3 2 90 90 40 130 1 0.444 1.444 0.233 3 3 160 90 60 150 0.563 0.375 0.938 0.286 3 4 200 90 80 170 0.45 0.400 0.85 0.5 3 5 230 90 100 190 0.391 0.435 0.826 0.667 3 6 250 90 120 210 0.36 0.480 0.84 1 3 7 260 90 140 230 0.346 0.538 0.885 2 3 8 265 90 160 250 0.340 0.604 0.943 4 If the firm produces 265 units of output and sells it at $1 per unit, is it making profits or losses? How much are they making?
A firm uses a single input to produce a commodity according to itsshort-run production function f(x) = 4√x, where x is the number of units ofinput. The commodity sells for $100 per unit. The input cost $50 per unit.(a) Write down a function that states the firm’s profit as a function ofthe amount of input.(b) What is the profit maximizing amount of input and output?(c) Suppose the firm is taxed $20 per unit of its output and the priceof its input is subsidized by $10, explain in detail how this will affect the newinput and output levels?
c) Assuming that the cost of employing each worker is $220 per day (including wages and materials), and Custom Made Pot has daily fixed costs of $400, fill in Table B given below: Round your AVC and MC answers to one decimal place. Number of TP = WorkersOutput 1 2 3 4 5 6 18 80 180 240 280 294 7 TVC($) 6 220 440 660 880 1100 1320 TFC Table B 400 400 400 400 400 400 TC 620 840 1060 1280 1500 1720 AVC($) 22 5.5 3.67 3.67 G ATC 62 10.5 5.89 5.33 5.33 5.3 3.9 4.5 5.8 d) On the graph given below, plot the following points showing the quantity and dollar amounts. point of diminishing returns (D) most productive point (P) economic capacity (E) Once a point is plotted, a tool icon will pop up. You can use this to enter exact co-ordinates for your points as needed. Tools Question 1- CH 6: In-Class Activity x MC($) 0 220 220 220 220 220 Prev i 1 of 8 Next > O & https://exto.mheducation.com/ext/map/index.html? l
(d) The long run average cost curve is U shaped because up to a certain point you have excess K/L and thereafter excess L/K. LRAC True or false Quantity The long run expansion path for a firm must be horizontal. (e) K True or false
Emco Company has an assembly line of fixed size A. Total output is a function of the number of workers (crew size) as shown in the following schedule: Crew Size Total Output (No. of Workers) (No. of Units) 0 0 1 10 2 35 3 50 4 56 5 59 6 60 7 60 8 58 Determine the following schedules: (a) Marginal productivity of labor (b) Average productivity of labor (c) (d) Elasticity of production with respect to labor Draw and Show relationship MPL & APL
2. What is the relationship between the total cost curve, and the average cost per unit? Explain their relationship, and draw a diagram showing how the two are related. The total cost of production, in thousands of dollars, is C(q) = q³ 12q² + 60q, where q is in thousands and 0 ≤ q ≤ 8. (a) Graph C(q). Estimate visually the quantity at which average cost is minimized. (b) Determine analytically the exact value of q at which average cost is minimized.
JayZee is the new sensation in the fashion industry, his cloth line is being appreciated and liked by the masses. Due to increased demand he decided to hire more labour (variable factor) while it is not possible for him to extend his warehouse size. If he hires you as an expert to ensure maximum profits with following information, take the best decisions. Total Product Units of Capital Units of Labour 0 5 0 100 5 1 240 5 2 400 5 3 500 5 4 560 5 5 570 5 6 570 5 7 520 5 8 460 5 9 Find: AP, MP and TR (show calculation) Find: Identify the three stages of production Construct the curves of TP, MP and AP Suggest how many labour should JayZee hire and why.
Q4 The output of a production process, Q, is given by the function KL Q = K+ 2L where K and L denote capital and labor. (a) Calculate the output when the capital and labor are 40 and 30 units, respectively. (b) Find the level of labor needed to produce 4 units of output when 10 units of capital are used. (c) Transpose this formula to express K in terms of Q and L. Q5 3 The equations defining a simple model of the economy are: C = 0.75Y + 18 I = 22 where C, Y and I denote consumption, national income and planned investment, respectively. Use this model to complete the following table of values and hence draw an accurate graph of C + I plotted against Y on the interval 0 < Y< 200. 100 200 C + I By drawing a second line on the diagram, calculate the equilibrium level of national income. Use your graph to explain what happens to the equilibrium level of national income when the marginal propensity to consume decreases with autonomous consumption fixed.

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Does the production function below show constant, increasing, or decreasing returns to scale if the firm increases the quantity of labor and capital used from a. 2L and 2K to 3L and 3K? b. 4L and 4K to 6L and 6K? Required: Provide graphs, solution and assumption.