Answer the following questions completely and be sure to show all wodc. You may attach separate...

Question

Answer the following questions completely and be sure to show all wodc. You may attach separate sheets of paper if necessary.
The difference between the short-run and the long-run production function is:
a. three months or one business quarter b. the time it takes for firms to change all production inputs c. the time it takes for firms to change only their variable inputs d. more information is required to answer this question
2. A firm that operates in Stage III of the short run production function
a. has too much fixed capacity relative to its variable inputs b. has too little fixed capacity relative to its variable inputs c. has greatly overestimated the demand for its output d. should try to increase the amount of variable input used
3. The perfect substitution of two inputs implies that
a. two inputs can be substituted at a ratio of I to I b. one input can be substituted for another up to some point c. two inputs can be substituted at some constant ratio d. one input can be substituted for another
4. An isoquant indicates a. different combinations of two inputs that can be purchased for the same amount of money b. different combinations of two inputs that can produce the same amount of output c. different combination so output that can be produced with the same amount of input d. different combinations of output that cost the same amount to produce.

005_pl1s8jk-d3noyzjy.pdf

Robert · Accepted Answer

1. b. 
2. b. 
3. a. 
4. b. 
5. b. 
6. b. 
7. c. 
8. d 
9. c. 
10. d. 
Answer to 11: 
a. 
In the table above, the production process exhibit constant returns to scale. This is 
because it can be noted that as we double each input, the output is also getting 
doubled. For example if we employ one unit of each input, output is 100, when we 
employ 2 units of each input, output is 200 and finally when we employ 4 units of 
each input, output is 400. 
b. 
    
X is fixed at 4 
units     
Y 
Total 
product of 
Y 
Marginal product 
of Y 
Average 
product of 
Y 
Marginal revenue 
product of Y 
1 170 170 170 85 
2 270 100 135 50 
3 340 70 113.33333 35 
4 400 60 100 30 
5 440 40 88 20
    
Y is fixed at 2 
units     
X 
Total 
product of 
X 
Marginal product 
of X 
Average 
product of X 
Marginal revenue 
product of X 
1 140 170 140 85 
2 200 60 100 30 
3 240 40 80 20 
4 270 30 67.5 15 
5 280 10 56 5
c. 
At the optimal, Marginal product of Y should equal the ratio of Cost of Y and price of 
output.  
The ratio of Cost of Y to price of output = 50/0.5 = 100 
We note from the first table above that marginal product of Y equals this ratio when 
2 units of y are hired. So firm should hire 2 units of Y. 
d.  
At the optimal combination, the MRTS (MPx/MPy) should equal the ratio (Px/Py) 
Here Px/Py = 20/40 = 1/2 
But here (MPx/MPy)>1/2, so firm should change its input combination and should 
hire more of input x and less of input y. 
Answer to 12: 
a.  
Sunk cost:

Answer the following questions completely and be sure to show all wodc. You may attach separate sheets of paper if necessary. The difference between the short-run and the long-run production function...

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