Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Question
Chapter 7.A, Problem 4E
(a)
To determine
The total cost (TC) function.
(b)
To determine
Identify the total cost (TC) function and returns to scale.
(c)
To determine
Identify the marginal cost and average cost at the new production level.
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An electronics plant’s production function is Q = 5LK, where Q is its output rate, L is the amount of labor it uses per period of time and K is the amount of capital it uses per period of time. The Price of labor is $1 per unit of labor and the price of capital is $2 per unit of capital.
a) What is the optimal combination of inputs the plant should use to produce 1000 units of output per period?
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A manufacturer named Kjell is facing the following product function.1
x = f(N, K) = 100Nº.8K0,2
The price for labor is NOK 500 per unit. The price for capital is NOK 125 per unit.
a) Does the product function provide constant, increasing, or decreasing scale benefits?
b) Kjell wants to produce 400 cakes at the lowest possible cost. How much labor and
does he need capital? What will be the cost?
c) The bank is not impressed by Kjell's production technology. He therefore receives a loan of
only NOK 1,875. How many cakes can Kjell produce a maximum of NOK 1,875.
d) Make a factor diagram (N, K). Note Kjell's adaptation from problem b) and c). Draw
the isocost lines and the substituent template.
e) A short-term strike leads to the price of labor rising to NOK 750. Kjell still has
only NOK 1,875. How will Kjell change his adaptation from c)?How many cakes
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f) Kjell eventually starts making money, and wants to expand production to 650
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Chapter 7 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
Ch. 7.A - Prob. 1ECh. 7.A - Prob. 2ECh. 7.A - Prob. 3ECh. 7.A - Prob. 4ECh. 7.A - Prob. 5ECh. 7 - Prob. 1RQCh. 7 - Prob. 2RQCh. 7 - Prob. 3RQCh. 7 - Prob. 4RQCh. 7 - Prob. 5RQ
Ch. 7 - Prob. 6RQCh. 7 - Prob. 7RQCh. 7 - Prob. 8RQCh. 7 - Prob. 9RQCh. 7 - Prob. 10RQCh. 7 - Prob. 11RQCh. 7 - Prob. 12RQCh. 7 - Prob. 13RQCh. 7 - Prob. 14RQCh. 7 - Prob. 1ECh. 7 - Prob. 2ECh. 7 - Prob. 3ECh. 7 - Prob. 4ECh. 7 - Prob. 5ECh. 7 - Prob. 6ECh. 7 - Prob. 7ECh. 7 - Prob. 8ECh. 7 - Prob. 9ECh. 7 - Prob. 10ECh. 7 - Prob. 11ECh. 7 - Prob. 12ECh. 7 - Prob. 13ECh. 7 - Prob. 14ECh. 7 - Prob. 15ECh. 7 - Prob. 16E
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