Question

In: Finance

The Production Function of a perfectly competitive firm is Q = 80L +12L2 -0.5L3, where Q...

  1. The Production Function of a perfectly competitive firm is Q = 80L +12L2 -0.5L3, where Q = Output and L = labor input

      a. At what value of L will Diminishing Returns take effect?

      b. Calculate the range of values for labor over which stages I, II, and III occur?

     c. Suppose that the wage rate is $30 and the price of output is $2 per unit. How many

          workers should the firm hire?

      d. At what value of L will Q be at its maximum? What is the maximum amount of Q?

      e. If demand forecasts predict an output level of between 1400 and 1600 in the next

          decade, what would be your long-run strategy to optimize the resources of your

         company?

Solutions

Expert Solution


Related Solutions

The Production Function of a perfectly competitive firm is Q = 80L +12L2 -0.5L3, where Q...
The Production Function of a perfectly competitive firm is Q = 80L +12L2 -0.5L3, where Q = Output and L = labor input       a. At what value of L will Diminishing Returns take effect?       b. Calculate the range of values for labor over which stages I, II, and III occur?      c. Suppose that the wage rate is $30 and the price of output is $2 per unit. How many           workers should the firm hire?       d....
The Production Function of a perfectly competitive firm is Q = 80L +12L2 -0.5L3, where Q...
The Production Function of a perfectly competitive firm is Q = 80L +12L2 -0.5L3, where Q = Output and L = labor input       a. At what value of L will Diminishing Returns take effect?       b. Calculate the range of values for labor over which stages I, II, and III occur?      c. Suppose that the wage rate is $30 and the price of output is $2 per unit. How many           workers should the firm hire?       d....
Given the Production Function of a perfectly competitive firm: Q = 30L + 12L2 - 0.5L3...
Given the Production Function of a perfectly competitive firm: Q = 30L + 12L2 - 0.5L3 , where Q = Output and L = labor input a. At what value of L will Diminishing Returns take effect? b. Calculate the range of values for labor over which stages I, II, and III occur? c. Suppose that the wage rate is $30 and the price of output is $2 per unit. How many workers should the firm hire? d. At what...
Given the Production Function of a perfectly competitive firm: Q = 30L + 12L2 – 0.5L3...
Given the Production Function of a perfectly competitive firm: Q = 30L + 12L2 – 0.5L3 , where Q = Output and L = labor input a. At what value of L will Diminishing Returns take effect? b. Calculate the range of values for labor over which stages I, II, and III occur? c. Suppose that the wage rate is $30 and the price of output is $2 per unit. How many workers should the firm hire? d. At what...
The Production Function of a perfectly competitive firm is Q = 80L +12L2 -0.5L3, where Q = Output and L = labor input
  The Production Function of a perfectly competitive firm is Q = 80L +12L2 -0.5L3, where Q = Output and L = labor input a. At what value of L will Diminishing Returns take effect? b. Calculate the range of values for labor over which stages I, II, and III occur? c. Suppose that the wage rate is $30 and the price of output is $2 per unit. How many workers should the firm hire? d. At what value of...
A competitive firm has the production function Q = (Lw + Lb) 1/2 , where Lw...
A competitive firm has the production function Q = (Lw + Lb) 1/2 , where Lw and Lb are the respective numbers of white and black workers employed. The price of output is constant at P = 36. The market wage is wb = 3 for black workers and ww = 9 for white workers. If a firm has a discrimination coefficient of d > 0, then it behaves as if the wage is wb(1 + d) for black workers...
A competitive firm has a production function ?(?, ?) = (? + ?)1/2 where ? and...
A competitive firm has a production function ?(?, ?) = (? + ?)1/2 where ? and ? stand for inputs capital and labour respectively. The price of capital is ?, and the price of labour is ?. Which of the following is true? Regardless of ? and ?, cost minimisation requires that ? = ?. If ? > ?, contingent demand for labour is 0. The technology has increasing returns to scale. If ? < ?, profit maximisation requires that...
There are 20 firms in a perfectly competitive industry. Ten firms have production function q =...
There are 20 firms in a perfectly competitive industry. Ten firms have production function q = 2L^0.5 while the other ten firms have production function q = 4L^0.5. We label the first type of firms, “low productivity” and the second type of firms, “high productivity.” All firms sell their output at a unit price of P = $1. All firms are price takers in the labor market. Find the profit maximizing demand for labor of the two types of firms....
A representative firm in a perfectly competitive market has a total cost function: ATC(q) = 72/q...
A representative firm in a perfectly competitive market has a total cost function: ATC(q) = 72/q + 4 + 2q and MC(q) = 4 + 4q. What is the firms fixed cost (FC) and variable cost (VC)? Calculate the market price at which profits would be zero. Calculate the profits or losses of the firms when price is $16. The market demand is given by Qd = 2000 – 20p. In the long run, what will the market demand be?...
A firm produces gizmos according to the production function Q =10KL , where Q is the...
A firm produces gizmos according to the production function Q =10KL , where Q is the quantity of gismos produced, K is the quantity of capital rented and L is the quantity of labour hired. The manager has been given a production target: Produce 9,000 gizmos per day. He is informed that the daily rental price of capital is $400 per unit and the wage rate is $200 per day. a) Currently, the firm has 10 units of capital. How...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT