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Suppose that for a firm that digs ditches for laying cable or pipeline, backhoes and backhoe operators are pure complements in production, being used on a one-for-one basis. Draw the isoquants (on a graph with backhoe, “K”, and backhoe operators, “E”, on the axes) for the production of three different quantities of ditches. Do they have a “funny” shape?
a) Now consider one such ditch-digging firm that has five backhoes but employs six backhoe operators. Can you explain why this might make sense? (Hint: think about whether/how the marginal product of the sixth backhoe operator could be positive)
b) Now suppose you see another ditch-digging firm that has seven backhoes but employs six backhoe operators. How could this make sense?
Create a scenario around this business in which a manager would decide to either stop operations in the short-run or going out of business in the long-run.
We use percent-changes in the formula for estimating the price elasticity of demand coefficient in order to:
Assume there are two firms in a market who each simultaneously choose a quantity.
If the current minimum wage is $7.50 an hour, there are 10 million workers who earn the minimum wage, and the elasticity of demand for low skilled labor is -0.2.
What is the short-run market supply curve? Determine the short-run equilibrium price and quantity in this industry.
Suppose two countries, A and B, with the same production function Y = K? L1?? . The value of is 0.30, the growth rate of population is 2% and the depreciation rate is 5%. Show that with price-taking firms the share of labor must be 1? Compare both e..
Calculate the output level and price that maximizes total revenue.
Why is market power an important element in the rule of reason treatment of tying contracts?
Calculate the Herfindahl-Hirschman Indexes for 2006 and 2011. What information does this index tell you about changes in the industry? How does this information differ from the four-firm and eight-firm indexes?
Consider that two countries, Brazil and Argentina, have the same rates of investment, population growth, and depreciation. They also have the same levels of capital per worker.
What would be the total profit of the firm if it sells the entire output at a cost of Rs. 60 per unit.
Assume a perfectly competitive firm's short-run cost is TC = 120 + 160Q + 3Q2. If the market price is $196, what should it do. Elucidate your answer, if continue then explain how much is to produce; state profit level in each decision it makes.
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