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Short Answer
Assume there are two goods: airplanes (a) and bananas (b). The labor-to-
capital ratios are 4 and 8, respectively. The labor-to-capital ratio in the whole
economy is 5. What is the fraction of capital (over the total amount of capital in the economy) used in the production of airplanes?
Assume there is one good in the economy. The good is produced using a standard Cobb-Douglas production function. Give an intuition for why output price does not affect the capital-to-labor ratio?
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- Using the following graph, which statement is true about opportunity costs of production for a technological increase in car production? planes cars It decreases for both planes and cars It increases for planes and decreases for cars. It increases for cars and decreases for planes. It increases for cars and stays the same for planes. O It increases for planes and stays the same for cars.Let assume, you live in an economy where two goods are being produced (say x and y) and labor can be allocated in the production of either good freely, but the other factor is specific. For your more information, good X" can be produced with labor and capital and good "y" can be produced with labor and land. Given the situation, a) How much does the each good the economy produced? b) How much labor will be employed in each sector?Supermarché Jean Claude has decided to manufacture its own brand of non-alcoholic beverages, called NAB, and chocolate bars, called S-JC. A certain amount of money has been allocated to the production of these two products. Jean Claude believes in the old saying that a picture is worth a thousand words, and once again, he has called on you. This time, he wants to see diagrams that illustrate the effects of each of the following events on the production possibilities for NABS and S-JCs so he can visualize the situation. (a) A new and more efficient method of producing non-alcoholic beverages is discovered. (b) The demand for both non-alcoholic beverages and chocolate bars increases. (c) More workers are hired to produce S-JCs. (d) Resources are transferred from S-JC production to NAB production. (e) All workers are trained so that the quality of their labour services improves. Instructions Produce the series of graphs with accompanying texts (150-175 words) so that Uncle Jean Claude…
- 11 11. Consider the following economy: There are three goods, legume, tillip and quillip, two consumers (called 1 and 2), and two firms (called x and y). Firm x is owned entirely by consumer 1 and makes tillip out of legume according to the simple linear production technology t :::; 3l . That is, for every unit of legume input, this firm produces three times as many (or less) units of tillip. Firm y is owned entirely by consumer 2 and makes quillip out of legume according to the production technology q = 4l. Each consumer initially owns 5 units of legume. Consumer 1 has utility function u1(t, q) = 6 + .4ln(t) + .6ln(q). Consumer 2 has utility function ui(t, q) = 8 +ln(t) + ln(q). (a) What is the general equilibrium of this economy? Assume that firms take prices as given and are profit maximizers, and consumers take prices as given. When you give prices, normalize…Given that Nathan has 10 acres and can grow 15 bales of hay or 40 bushels of corn on an acre, while Simon has 10 acres and can grow 20 bales of hay or 35 bushels of corn per acre. I am trying to come up with the equations to find out the maximum amount of produce they can jointly produce.How many units of labor and capital should be purchased to maximize production? What is the maximum number of units of production?
- 17. For a certain good the production function is given by the equation q = q²qc, where q is the produced output in units of 1000 and qL and qc are the number of units of labour and of capital invested in the production process. Assume that one unit of labour costs 10 units of money and one unit of capital costs 5 units of money. (a) Show on a graph which combinations (qL, qc) generate exactly 64 000 units of output. Put qL on the horizontal axis of the graph and qc on the vertical axis. (b) Explain how one can see on the graph of part a which combinations (qL, qc) allow to produce 64 000 units using a budget of exactly 100 units of money. (c) Explain how one can see on the graph of part a which combinations (qL, qc) allow to produce 64 000 units in the cheapest possible way.Table 19.15 shows how the average costs of production for semiconductors (the "chips" in computer memories) change as the quantity of semiconductors built at that factory increases. a. Based on these data, sketch a curve with quantity produced on the horizontal axis and average cost of production on the vertical axis. How does the curve illustrate economies of scale? b. If the equilibrium quantity of semiconductors demanded is 90,000, can this economy take full advantage of economies of scale? What about if quantity demanded is 70,000 semiconductors? 50,000 semiconductors? 30,000 semiconductors? c. Explain how international trade could make it possible for even a small economy to take full advantage of economies of scale, while also benefiting from competition and the variety offered by several producers. Quantity of Semiconductors 10,000 20,000 30,000 40,000 100,000 Table 19.15 Average Total Cost $8 each $5 each $3 each $2 each $2 eachIf a good is labour intensive it means that no capital is used in the manufacturing of that good. True/ false and reason
- Suppose a nation has a total of 12 units of labor, which can be used to produce either guns or butter. One gun takes 6 units of labor to produce and 1 butter takes 2 units of labor to produce. Why shouldn't the nation produce 1 gun and 2 butters?Question 1 Consider an economy which is producing two goods computers (C) and shoes (S) using two factors of production capital and labor. To produce one computer, it requires 200 units of capital and 5 units of labor. To produce a pair of shoes, it requires 10 units of capital and 1 units of labor. (Unlike the Cobb-Douglas production used in the text, here we are using fixed proportions (Leontief) production functions to make the math easier. That is, the 2 inputs are used in fixed proportions and cannot be substituted for each other) (a) Calculate the capital/labor ratios used in computers and shoes. Which good is more capital-intensive? Now, suppose the price of one computer is $500 and the price of a pair of shoes is $40. (b) Using the information on goods prices and the production function for the two goods calculate the wage and the rental rate of capital. (c) Suppose the price of computer increases to $650 but the price of shoes remains at $40. Verify the Stolper-Samuelson…Production Techniques: I II III IV Labor 4 3 2 5 Capital 2 3 5 2 Answer the question on the basis of the following information: Suppose 15 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $3 and $5, respectively. Which technique is economically most efficient in producing A?
