5.1 (a) Suppose the production function is Q = min {K, 2L}. How much output is produced when 4 units of labor and 9 units of capital are employed? Please explain.
(b) You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 20, and MPK = 40 Is the firm minimizing costs? If not, should the firm use more labor and less capital, or less labor and more capital
(c) Given the following table, how many workers should be hired to maximize profits?
Labo
Marginal
Product Labo
VMPL
Wage
1
8
$32
$100
2
32
$128
$100
3
16
$64
$100
4
-1
$-4
$100
5
-12
$-48
$100
5.2.
AB is the original (starting) isocost line. AC is the new (changed) isocost line. Q0 is the isoquant. D is the original tangency point (cost minimization point for output Q0).
(a) Is price of capital rising or falling or unchanged when the isocost line moves from AB to AC?
Please explain.
(b) Please draw an isoquant and show the new tangency point between the new isocost line AC
and an isoquant that would indicate the new equili
ium point for this firm.
(c) As a result of the price change, does output fall or rise? Please explain.
5.3.
What can you say about the cost of producing output level Q0 represented by the isoquant given above at point E, compared to the cost of producing Q0 output level at either point F or point G? Please explain.
5.4. Cu
ently wages show signs of increasing in the United States as the economy continues to recover from the pandemic. Companies are having trouble hiring workers and often higher wages are also not enough to convince workers to accept jobs at many companies. Explain how the shortage is due to a change in demand for workers and a change in supply of workers during the recovery from the pandemic. You must explain why demand for workers is low or high and why supply of workers is low or high.
6.1. Assume that for fast food restaurants like McDonalds, some stores are owned by franchisees (independent businesses who pay a franchise fee to McDonalds) and some stores are directly owned by McDonalds who will hire the manager for these company owned stores. The manager at the franchise owned McDonalds is often the owner of the restaurant, and the manager of the McDonalds owned restaurant is a company employee who gets a flat salary. In which case will there be a principal-agent problem? Please explain.
6.2. Use of the internet for personal work reduces the productivity of workers and many firms make attempts at cracking down on this personal use of the internet in order to improve worker productivity. Is it worth making an attempt at completely eliminating personal use of a work computer and internet connection and taking all the steps that would be necessary to completely eliminate personal use of work computers? Please explain.