Suppose in the short run, the firm can adjust the amount of labor L, and the...

Suppose in the short run, the firm can adjust the amount of labor L, and the amount of capital, K*, is fixed. The production function is ?(?, ?) = ?1/3? 1/3 . The price of output is p, the rent of capital is r, and the wage of labor is w.

a. Write down the profit of the firm in terms of K*, L, p, r, and w.

b. Suppose now ? ∗ = 125, ? = 27, ? = 2, and ? = 5. Write down the isoprofit equation when the profit is 0. (Hint: the quantity of output q, is a function of labor L)

c. ? ∗ = 125, ? = 27, ? = 2, and ? = 5. The firm is trying to maximize the profit in short run. Write down the first order condition and find how much labor the firm would like to hire.

Expert Solution

Rahul Sunny answered 2 years ago

A firm uses two inputs in production: capital and labor. In the short run, the firm...

A firm uses two inputs in production: capital and labor. In the short run, the firm cannot adjust the amount of capital it is using, but it can adjust the size of its workforce. -- If the cost of renting capital increases, which of the following curves will be affected? (Check all answers that apply). -- Average variable cost Marginal cost Average fixed cost Average total cost 2 points QUESTION 2 If the cost of hiring workers increases, which...

Cost of Production in the Short-run. SHOW FORMULA IN EXCEL Price of Labor (L) is PHP...

Cost of Production in the Short-run. SHOW FORMULA IN EXCEL Price of Labor (L) is PHP 100 while Price of Capital (K) is PhP 50. What is the best cost-minimizing combination of K and L? Price of Capital (K) Price of Labor (L) TP aka Q Total Fixed Cost Total Variable Cost Total Cost Ave Fixed Cost Ave Variable Cost Ave Total Cost Marginal Cost 10 0 0 10 1 14 10 2 35 10 3 62 10 4 91...

This is a closed economy. Wages are unable to adjust in the short run. At first,...

This is a closed economy. Wages are unable to adjust in the short run. At first, the economy equilibrium is at Y=Original, and P=Pe (the expected price level when managers signed contracts for nominal wages. This is a horizontal short-run aggregate supply curve. Consider this: The government increased spending (G) by 215. A) How will Investment (I) change in the short-run? B) How will Consumption (C) change in the short-run? C) How will Output (Y) change in the short-run? D)How...

Consider a short-run production function Q(L), where L is labor input. Think of the case when...

Consider a short-run production function Q(L), where L is labor input. Think of the case when L is large enough so that the marginal product of labor is decreasing. If the average product of labor equals the marginal product of labor, which of the following statement is true? A) the average product of labor is at a maximum. B) the marginal product of labor is at a maximum. C) Both A and B above. D) Neither A nor B above....

Suppose a firm's short run-run production function is q = 2 * L0.5 , the firm...

Suppose a firm's short run-run production function is q = 2 * L0.5 , the firm faces a fixed price of L at PL = 4, and the firm’s fixed cost is 50. a. Derive the short-run total cost and total variable cost functions, and then solve for the marginal cost, average variable cost, and average total cost functions. Assume the firm is a marginal price taker at P = 60, solve for the firm’s profit-maximizing amount of L to...

Assume a firm has 2 inputs in its production function, labor and capital, and can adjust...

Assume a firm has 2 inputs in its production function, labor and capital, and can adjust the amount of either one of these inputs in order to increase output. Assume the marginal product of a unit of capital is always twice as high as the marginal product of a unit of labor (this is true regardless of how much labor and how much capital the firm employs). If the firm wanted to expand output, would they ever do so by...

Production/Cost Exercises 1. The following is a short-run production table for a firm with labor as...

Production/Cost Exercises 1. The following is a short-run production table for a firm with labor as its only variable input. Wage = $ 200 Capital = 100 units Capital Price= $40 Product Price= $120 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....

Consider the short-run. As a firm hires more labor, total output ___ and the marginal product...

Consider the short-run. As a firm hires more labor, total output ___ and the marginal product of labor ___. rises; falls falls;rises falls;falls rises;rises Consider the short-run. As the firm hires more labor, average output per laborer ___. remains unchanged falls rises Consider ACME, a monopoly (not a natural monopoly) in the production of rocket skates. The rocket skates industry hired 5,041 workers last year. All else equal, if antitrust authorities were to break up this monopoly (creating a perfectly...

Suppose that a typical firm is receiving economic profits in the short run in a monopolistically...

Suppose that a typical firm is receiving economic profits in the short run in a monopolistically competitive industry. Carefully explain what will happen in the long run to: the number of firms the demand curve facing each firm price individual firm output and industry output economic profits or losses

Question 4 A firm has the short-run production function as follows: Q = L + 15L2...

Question 4 A firm has the short-run production function as follows: Q = L + 15L2 – 0.5L3, where Q = total products per period and L = number of workers employed per period. 4.1) Derive the marginal product of labor (MPL). At what number of workers (L) does the law of diminishing returns begin? MPL = f(L) = __________________________________ Law of diminishing return begins when L = ___________ workers. 4.2) Derive the average product of labor (APL). Find the number...

Question