Exam 6: Producer Behavior

Brenda's Pastry employs three workers who produce 6 dozen pastries per hour. After Brenda hires a fourth worker, the number of pastries produced increases to 7 dozen per hour. Because the marginal product of the fourth worker is _____ than the average product of three workers the average product must _____.

Use the following to answer question: Figure 6.8 -(Figure 6.8) The movement in the isocost line is caused by a(n):

Answer the following questions. Table 6.8 Table 6.9

A company has the production function Q = min{K, L}. The price of capital is $50 per unit while the price of labor is $75 per unit. On a graph, plot isoquants for quantities 10, 20, and 30, as well as the isocost line for a quantity of 20. Note the cost-minimizing levels of capital and labor on your graph given the target production level of 20 units.

For the production function Q(K,L) = 3K + 2L, the marginal rate of technical substitution MRTS_LK is:

Which of the following is (are) example(s) of production functions?

For each of the following production functions, determine whether they exhibit constant, decreasing, or increasing returns to scale. a. Q = 4KL b. Q = K^1/3L^2/3 c. Q = K^1/3L^1/3 d. Q = min(K, 4L) e. Q = 6K + 3L

Suppose the production function for a bakery is: Q = 4K^0.4L^0.6 where Q is the number of loaves of bread produced per day, K is the number of ovens, and L is the number of workers employed. Suppose that the wage rate is $5 per hour , the rental rate of capital is $10 per hour, and the baker wants to produce 4,000 loaves of bread. Use calculus for the following: a. to derive the firm's demand for labor b. to confirm that the demand for labor satisfies the law of demand

Define a production function and give an example of a Cobb-Douglas production function with constant returns to scale.

Answer the following questions.

Use the following to answer question: Figure 6.19 -(Figure 6.19) Find and graph the expansion path.

Use the following to answer question: Figure 6.15 -(Figure 6.15) Answer the following questions.

A firm spends $12,000 per day producing a good. The wage per worker is $200 per day and rental per unit of capital is $400 per day. The firm faces the production function Q = 3K^1/3L^2/3 with MP_K = L^2/3/K^2/3 and MP_L = 2K^1/3/L^1/3. The cost-minimizing level of capital will be_____ and the cost-minimizing level of labor will be _____.

Suppose a firm with a production function given by Q = 4K^0.25L^0.75 produces 100 units of output. The firm pays a wage of $30 per units and pays a rental rate of capital of $10 per unit. (Note: ). The minimum cost of producing 100 units of output is:

The production function for laser eye surgery is given by Q = 20K^0.5L^0.5, where Q is the number of laser eye surgeries performed per day, K is the number of eye surgery machines (which is fixed at 2 in the short run), and L is the number of employees.

Use the following to answer questions 11-12: Figure 6.1 -(Figure 6.1) The average product at L = 2 and L = 8 respectively are:

Which of the following production functions exhibit(s) constant returns to scale?

Suppose that a firm's production function is . Use calculus to find the marginal rate of technical substitution and discuss how MRTS_LK changes as the firm uses more labor, holding output constant.

MRTS_LK decreases as the firm substitutes labor for capital along the isoquant for all production functions below EXCEPT:

Suppose that a firm's production function is . Use calculus to find the marginal rate of technical substitution and discuss how MRTS_LK changes as the firm uses more labor, holding output constant.