Initially a firm's wage is w = $24 and its rental cost of capital is r = $24. After its wage rate doubles, how do its isocost lines change? Let L represent labor and K capital. 1.) Using the line drawing tool, graph an isocost line at the original wage, when the wage is w = $24. Label this line '11. 2.) Using the line drawing tool, graph an isocost line at the new wage, when the wage doubles. Label this line '12. Carefully follow the instructions above, and only draw the required objects. K, Capital 20- 18- 16- 14- 12- 10- 8- 6- 4- 2- 0- 0 2 4 6 8 10 12 14 16 18 20 L, Labor

Initially a firm's wage is w = $24 and its rental cost of capital is r = $24. After its wage rate doubles, how do its isocost lines change? Let L represent labor and K capital. 1.) Using the line drawing tool, graph an isocost line at the original wage, when the wage is w = $24. Label this line '11. 2.) Using the line drawing tool, graph an isocost line at the new wage, when the wage doubles. Label this line '12. Carefully follow the instructions above, and only draw the required objects. K, Capital 20- 18- 16- 14- 12- 10- 8- 6- 4- 2- 0- 0 2 4 6 8 10 12 14 16 18 20 L, Labor

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter7: Proudction Costs

Section: Chapter Questions

Problem 10SQ

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Initially a firm's wage is w= $24 and its rental cost of capital is r $24. After its wage rate doubles, how do its isocost lines change? Let L represent labor and K capital. 1.) Using the line drawing tool, graph an isocost line at the original wage, when the wage is w = $24. Label this line 11: 2.) Using the line drawing tool, graph an isocost line at the new wage, when the wage doubles. Label this line '12. Carefully follow the instructions above, and only draw the required objects. 20- 18- 16- 14- 12- 10- 8- 6- 4- 2- K, Capital 0 2 4 6 8 10 12 14 16 18 L, Labor
QUESTION 2 K 6 isocost 3 L Based on the information in the graph aboive, what is the slope of the isocost line? # If the price of capital remains the same and the price of labor decreases, the isocost line will With the current mix of labor and capital, the marginal technical rate of subsitution is MRTS-3. If the prices of labor and capital remain as shown in the graph, then the firm will minimize the cost of production by +
How does the curvature of an isoquant relate to the marginal rate of technical substitution along an isoquant?
What is technical rate of substitution? Show it graphically.
Q3) A chair manufacturer hires its assembly-line labor for $30 an hour and calculates that the rental cost of its machinery is $15 per hour. Suppose that a chair can be produced using 4 hours of labor or machinery in any combination. Graphically illustrate the isoquant and the two isocost lines for the current combination of labor and capital and for the optimal combination of labor and capital.
Suppose the wage rate for labor is $20 an hour and the rental rate for capital is $50 per hour. Based on this information, please answer the questions appearing below the graph. 80 70 60 50 40 30 20 10 10 20 30 40 50 60 70 80 1,000 cases Labor Draw an (approximate) is-cost line associated with an hourly budget of $1,000. Hint: Find the intercept points first. If you were to shift this line out, what is the approximate least-cost combination of labor and capital when packaging 1,000 cases of fruit juice?
Gopher Excavators produces shovels in a small factory and sells the shovels in a competitive market. The following table shows the company's production function: Labor Output (Number of workers) (Shovels) 1 80 2 150 3 210 4 250 5 270 Use the blue points (circle symbol) to plot the production function for Gopher Excavators on the following graph. 300 270 240 Production Function 210 180 150 120 90 60 30 LABOR (Number of workers) OUTPUT (Shovels)
Brian uses wool (K) and labour (L) to produce t-shirts (q). The production function is: q = min{1/3L, 2K}.If he uses 1 kg of wool and 3 hours of labour, he can produce 1 t-shirt.1. Draw isoquants for q = 1 and q = 2 on a diagram with labour on the horizontal axis and wool on the vertical. 2. The pice of wage per hour is given by w=$10 and the price of each kg of wool is given by r=$4. What is the optimal bundle of that he can produce in order to minimise costs? Draw the isocost lines.
4. Considertheproductionfunction f(L;K)=L+K. a. Suppose K is Öxed at 2. Find algebraic expressions for the total product of labor function TP(L), the average product of labor AP(L), and the marginal product of labor MP(L). b. Graph the functions in part a.
6. A company uses two inputs, unskilled labour (L) and capital (K), to produce itsproduct. The wage rate for a unit of labour is €5, while a unit of capital cost €20.a) Determine the equation and plot the isocost line for the company's expenditures on itsinputs of €1,000. Label the intercepts of the isocost with both axes. Draw a typical isoquantfor an output level Q0 and indicate the optimal input levels of L and K. (Do not forget tolabel the axes).b) Suppose the government introduces a minimum wage for unskilled labour of €6 per unit.Show graphically and explain shortly how much it would cost the firm in the short run,with capital input fixed at K, to keep its output constant at Q0.c) Show graphically and comment shortly on the optimal factor mix that the firm would useto produce Q0 in the long run at the specified minimum wage of €6 per unit
Complete the table by computing the marginal product for each worker. Labor Total Output (Number of workers) (Pizzas per day) UNITS OF OUTPUT 9 90 80 70 8909 50 40 330 20 CH 10 HH 0 0 1 0 2 1 2 3 4 5 6 7 8 On the following graph, plot Brian's total output using the green points (triangle symbol). (Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. Be sure to plot the first point at (0, 0).) (?) 9 10 000 m2 58 8 3 18 30 43 55 65 73 79 82 80 4 5 6 NUMBER OF WORKERS 7 Marginal Product AAAAAAAAAA B 9 10 A Production Function
A firm can manufacture a product according to the production function Q = 2(K)1/4 (L)3/4 where K represents capital equipment and L is labor. The company has already spent $10,000 on the 4 units capital. a. Please show the expression for the average product of labor, APL and the marginal product of labor, MPL. If workers at the firm are paid a competitive wage of $100 and the product is sold for $200 each, what is optimal level of labor usage and what is the maximum profit?