In: Economics

Imagine a firm that only uses capital (K) and labor (L). Use an
isocost / isoquant diagram to illustrate the firm’s equilibrium
input mix for given prices of capital and labor and a given rate of
output. Now illustrate what happens if the price of labor falls,
and the firm wants to produce the same rate of output. What happens
to the cost of production? Compare the relative marginal products
of labor and capital (the MRTS) at the two equilibria.

When price of labor falls, isocost line becomes flatter and now isocost line is AC. Equilibrium output will increase as price of labor falls. And equilibrium occurs at e1 level, where isocost line AC and isoquant line IQ1 are tangent with each other

There is a firm who manufacturers and uses capital (K) and labor
(L) to product output Q such that Q=10KL. The unit price for K and
L are w = $15 and r = $5, respectively.
1).Does the firm’s production exhibit decreasing, constant, or
increasing returns to scale?
2)What is the optimal input bundle (K*, L*) to produce 480 unit
of output?
3)Derive the long run cost function.

A firm discovers that when it uses K units of capital
and L units of labor it is able to
produce q=4K^1/4
L^3/4 units of output.
Continue to assume that capital and labor can be hired at $40
per unit for labor and $10 for capital. In the long run if the firm
produces 600 units of output, how much labor and capital will be
used and what is the LR Total cost of production?

A firm discovers that when it uses K units of capital
and L units of labor it is able to
produce q=4K^1/4
L^3/4 units of output.
a) Calculate the MPL, MPK and MRTS
b) Does the production function (q=4K^1/4 L^3/4) exhibit
constant, increasing or decreasing returns to scale and
why?
c) Suppose that capital costs $10 per unit and labor can
each be hired at $40 per unit and the firm uses 225 units of
capital in the short run....

A firm produces output using capital (K) and labor (L). Capital
and labor are perfect complements and 1 unit of capital is used
with 2 units of labor to produce 1 unit of output. Draw an example
of an isoquant. If wages and rent are $2 and $3, respectively, what
is the Average Total Cost?
A firm has a production function given by Q=4KL where K, L and Q
denote capital, labor, and output, respectively. The firm wants to
produce...

Suppose your firm uses 2 inputs to produce its output: K
(capital) and L (labor). the production function is q =
50K^(1/2)L^(1/2). prices of capital and labor are given as r = 2
and w = 8
a) does the production function display increasing, constant, or
decreasing returns to scale? how do you know and what does this
mean?
b) draw the isoquants for your firms production function using L
for the x axis and K for y. how are...

Plot an Isocost line for a firm that is spending $10,000
on labor and capital. Then, draw a Cobb-Douglas Isoquant for this
firm that intersects your Isocost curve. Label the two intersection
points A and B. Draw a second Isosquant that is just tangent to the
Isocost curve, and label the point of tangency point C. Explain why
it would not be efficient for this firm to produce at point A nor
point B.

There are two kinds of factors of production, labor L and
capital K, which are only available in non-negative quantities.
There are two ﬁrms that make phones, Apple and Banana. To make qA
phones, Apple’s input requirement of (L,K) is given by production
function f(L,K) = L0.6K0.2. To make qB phones, Banana’s input
requirement of (L,K) is given by production function g(L,K) =
L0.75K0.25.
(a) (Time: 3 minutes) How many phones can Apple make with factor
bundle (L1,K1) = (1,1)?...

Using a model of production isoquant curves and isocost curves
explain how a firm with a Cobb-Douglas production function will
meet its quota for producing a necessary level of output while
minimizing costs. How would this firm choose among competing
production technologies or change its production when it implements
an improved technology (innovation)?

Please use Isoquant-isocost graph to explain. Thank
You!
remember: isoquant curve would not change, just need to
generate Q1 level of electricity.
here are asking about the changes in production
cost
•Suppose a power plant can use a mixture of coal and renewable
resources to generate Q1 level of electricity.
And the price of coal is Pc and price of renewable
resources is Pr. Notice that the use of coal or renewable
resources will subject to law of diminishing marginal...

The production function has two input, labor (L) and capital
(K). The price for L and K are respectively W and V.
q = L + K a linear production function
q = min{aK, bL} which is a Leontief production function
1.Calculate the marginal rate of substitution.
2.Calculate the elasticity of the marginal rate of
substitution.
3.Drive the long run cost function that is a function of input
prices and quantity produced.

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