Exam 8: Producers in the Long Run

Suppose a shipping company employs 2000 workers,operates 400 delivery trucks and makes 1.5 million domestic shipments in one year.The next year they increase their workforce to 3000 workers,operate 600 trucks and make 2.8 million domestic shipments in one year.This firm is exhibiting returns to scale.

The creation of a new product is called

Consider a firm that uses only labour and capital.At the present use of labour and capital,the MP of labour is twice the MP of capital,and the price of labour is four times the price of capital.In order to minimize its costs,the firm should

The long- run average cost (LRAC)curve shows

One hundred years ago,in North America and Europe it was commonplace for middle class households to employ housemaids.As you know,this is quite rare today.Most such households now have dishwashers,washing machines and dryers.What is an explanation of this change?

The following table shows the marginal products of capital (K)and labour (L)for various methods for Firm ABC to produce 1000 toys per day. Production Method A 50 4 B 45 8 C 40 12 D 35 16 E 30 20 F 25 24 G 20 28 TABLE 8- 2 -Refer to Table 8- 2.As this firm switches from production method A to production method G,production is

The following table shows the marginal products of capital (K)and labour (L)for various methods for Firm ABC to produce 1000 toys per day. Production Method A 50 4 B 45 8 C 40 12 D 35 16 E 30 20 F 25 24 G 20 28 TABLE 8- 2 -Refer to Table 8- 2.Suppose capital costs $80 per unit and labour costs $24 per unit.Which production method minimizes the cost of producing 1000 toys per day.