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1) Futons Inc. produces futons using only two inputs – capital (wood, nails, and hammers) and labor (measured in worker hours) – with a technology characterized by the following function:q = 2ln(K + 3L)Futons Inc. spent $100 on 100 units of capital at the beginning of the period. They can neither purchase nor sell units of wood, nails, and hammers until the end of the period, but the material does not lose any value over time.
a) Solve for the average product of labor and the marginal product of labor.
b) Assuming that futon makers earn a wage of $9 per hour and the prevailing interest rate in the economy is 10 percent, solve for short run costs as a function of the numbers of futons produced.
2) Suppose the recent recession led to a drop in wages such that the price of labor fell by 25 percent. Economists predict that this drop will be sustained in the long run. Furthermore, the user cost of capital has not changed, nor is it predicted to. How does this change in relative prices affect a firm’s long run expansion path? Please explain using both words (i.e., economic intuition) and a graph.
Jim sees commuting by bus and T as perfect substitutes (U = T + B), that is, he would exchange one commute by bus for one commute by T. The price of a bus ticket is $1.50 and the price of a T ticket is $2.00. Jim has $6.00 to spend on commuting. (a) ..
Suppose we know that the average number of customers present in a queuing system is 10 and the average number of customers waiting in line is 4. Given that the average number of arrivals entering the system per hour is 20, determine the average time ..
Indicate whether each of the following is counted in this year’s GDP: You bought a new Wii at GameStop last year and resold it on eBay this year. You purchase an “Investing for Dummies” book at Barnes and Noble. You purchase a historic home using the..
Which of the following established the inverse relationship between the price of a product and the quantity of the product demanded?
Assume that labor demand is inelastic enough such that there are two equilibria. Explain how a complete and perfectly enforced ban on child labor might improve conditions for families according to this model.
The demand for MICHTEC's products is related to the state of the economy.
Suppose the logging industry forms a union that requires longer apprenticeships and charges high fees to its members. Discuss the reasons why loggers might place these stipulations on union members. What are the loggers hoping to achieve?
To increase a company’s performance, a manager suggests that the company needs to increase the value of its product to customers. Describe three ways in which this advice might be incorrect (Hint: Think about what else might or might not change that ..
In a particular industry, labor supply is ES=20+w and labor demand is E D=60-4w , where E is the employment level and w is the hourly wage. What are the equilibrium wage and employment if the labor market is competitive?
There is a shortage in the market for a product when.
q.mirk labs is a pharmaceutical company that currently enjoys a patent monopoly in europe canada and the united states
Suppose that the price of the firm’s product is $20. What are the firm’s marginal and average revenue product functions? What is the firm’s short-run demand function for input Z.
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