Exercise 4. Cost Minimization Short and Long Run (Minimum Wage Workers)

McDonald’s employs minimum wage workers operating registers to take orders. Let y be the output of orders taken in an hour, L be the number of minimum wage workers working the registers, and let K be the number of registers. The production function is y=100∙L^½K^½.

1. Let the number of registers, K=4, be fixed. Are there diminishing marginal returns to labor? Explain why, and find ∂y/∂L.

2. Let the number of counter employees, L=4, be fixed. Are there diminishing marginal returns to capital? Explain why, and find ∂y/∂K.

3. If L=4 and K=4, how many customers are served in an hour? If both inputs are doubled, what happens to output, y? Does it double, more than double or less than double?

4. Consider minimum wage at w=$10/hr. Each register costs over $3,600, however, the daily amortization cost is r=$10, whether the register is used for one hour or several hours. What is the cost of serving y=400 customers?

5. What are the conditional factor demands, L(w,r,y) and K(w,r,y)? What is the minimized cost function C=(w,r,y)? Given w=10, r=10, and y=400, what is the minimum cost?

6. The minimum wage is raised to w’=$20/hr. What happens in the short run, with registers fixed at K=4? Find the new L(w,r,y) and the short-run cost function.

7. What happens in the long run, when McDonald’s can change K as well? McDonald’s automated kiosks allow for many registers to work directly with customers with minimum employee’s supervision. Do you think minimum wage laws are affecting technological change, or what other factor do you think might spur the introduction of automated kiosks?

Problem 1) Today, April 1^st 2020, I put $1000 into the bank. Every month thereafter I added the same amount, plus $20 more than the month before (i.e. $1020, $1040, $1060, etc.) If the sign on the door of my bank says they pay 6% nominal yearly interest, how much will I be able to take out of the bank on January 1^st, 2023. Draw a cash-flow diagram.

1. Many people in the small town of Econville have complained that there is no park for children to use afterschool. There are 20 households in the town, 10 who have children and 10 who do not. The households with children value the park being built at $100 each while the other households value it at $20 each. The town estimates that the cost of building a park is $600. All households earn the same income.

   1. (a) Would describe the park as a public good? Explain.

   2. (b) The first proposal is fund the park with a flat tax. What is the minimal tax per household required to build the park? Who will and who will not support such a tax and will the park be built?

   3. (c) A second proposal is a tax that only applies to the households with children. What tax per household will ensure that the park is built? Who will and who will not support such a tax? Why?

   4. (d) Athirdproposalisataxpaymentthatisproportionaltothebenefiteachhousehold receives from the park. In this proposal, how much will each household be expected to pay? Who will and who will not support such a tax? Why?

   5. (e) Evaluate the three policies listed and state which you will choose and why.

Should a defense attorney be allow to use insanity as a defense for murder? Is this defense strategy overused? Provide an example of a crime in which the “act” is visible but the “intent” may not be as clear.

What is your main takeaway from Circular Economics and Doughnut Economics?

A pump in a production plant costs $15,000. After 9 years, the salvage value is declared at $0. Determine the depreciation charge and book value for Year 9 using Straight Line, SOYD, and 7-years MACRS depreciation. Then, find the PW of each depreciation schedule if the interest rate is 15%.

Name two ways a bank minimizes credit risk before a loan is made. Name two ways it does this after the loan is made.

1. Employment data. where does it come from and what context/ideas do we need to understand to use it meaningfully?

2. Measuring and comparing aggregate output. Measurement issues related to calculating and comparing GDP and related aggregate accounting concepts.

3. Using and interpreting the Aggregate Supply and Aggregate Demand Model. What are its limitations and caveats?

What trends can explain the differences in poverty rates from the 2000s to recent years in light of changes in economic conditions in the overall US economy during this period?

Discuss the extent to which US policy in Latin America in the late-nineteenth century and the first half of the twentieth century was representative of the tendency toward globalization and discuss the kind of globalization it represented.

An industrial firm can buy a machine for $ 40,000. A down payment of $ 4,000 is required and the balance can be paid in equal 5-year terms at 7% interest on the unpaid balance. As an alternative, the machine can be purchased for $ 36,000 in cash. If the firm's MARR is 10%, determining the applicant for alternatives must be accepted using the annual equivalency method

** I need the graph of the situation

1. Using Ireland as your home country, discuss the country’s situation with regards to inward FDI.

Thomas Malthus

1. How do Malthus’ theories on population growth and food growth apply to China’s 1-child policy?

2. What type of check (preventative or positive) would this policy be an example of?

Judith Maxwell

1. In your opinion, Low Literacy can affect a person’s lives in what ways?
2. In what ways the government can help reduce the issue of Low Literacy?

Henry George

1. What would Henry George’s theories say about a person who purchased a piece of land but is choosing not to develop it because they plan to sell it for a profit in the future.

PPL Finds Largest Gas Reserves in Pakistan Since Sui. Last year,PPL carried out a testing and
proved the presence of large gas reserves. For comparison,Sui has estimated reserves of 2
trillion cubic feet with a daily output capacity of about 604 million cubic feet.Drilling only one
reserve suggests that the entire block has the potential to supply 10.7 million cubic feet of gas
per day. This is the first significant discovery of gas reserves in Baluchistan since 2000. Pakistan can
save more than $900 million on the import bill if this gas reserves replace LNG, which costs
domestic consumers 100% more than Sui gas, according to an ex-PPL board director.

a)As a result of drilling the gas reserves,Pakistan moved from a point within its production
possibility curve to a point on its production possibility curve. Explain what is meant by economic efficiency.Analyze what happened to economic
efficiency in the country as a result of this movement.[12]

b)Analyze the existence of possible externalities due to gas drilling. Discuss possible
government intervention in the economy as a necessary and sufficient condition for
overcoming inefficiency in resource allocation.[13]