Exam 6: Producer Behavior

Use the following to answer question: Table 6.1 -(Table 6.1) Diminishing marginal returns to labor occur in production process _____, and diminishing marginal returns to capital occur in production process _____.

Suppose a firm is currently minimizing costs in the long run with marginal product of labor and marginal product of capital given by K and L, respectively. If the price of capital falls by 50%, the capital-to-labor ratio will:

In the long run, because firms can adjust both capital and labor:

Solving for the value of the Lagrange multiplier in the firm's cost minimization problem tells us:

Answer the following questions.

Which situation will likely give rise to diminishing marginal product of labor?

Suppose that a firm's production function is given by Q = KL (MP_K = L and MP_L = K), where Q is quantity of output, K is units of capital, and L is units of labor. The price per unit of labor and capital are $30 and $20, respectively.

Use the following to answer question: Table 6.7 -(Table 6.7) Consider the production function that this table shows.

Use the following to answer question: Figure 6.4 -(Figure 6.4) Put these four panels in order from the easiest case of input substitutability to the hardest case of input substitutability.

For the following questions assume that the marginal product of capital = and the marginal product of labor = .

The production function for a firm is Q = min(2K, L). The price per unit of capital is $40 and the price per unit of labor is $60.

Consider the following production functions along with its corresponding marginal product of labor function.

The McCue Corporation is a house-painting business. For a standard-sized house, it will use 4 painters applying paint by brush or two painters applying paint with 1 paint sprayer. Assume that a paint sprayer can be rented for $50 per day while workers are paid $75 per day. The production function exhibits constant returns to scale. The long-run production function for McCue Corporation will be _____ with a total cost equation of _____.

(Figure 6.3) Which of the following statements is (are) TRUE?

Consider the production function Q = (0.5K^1/3 + 0.5L^1/3)³ with a corresponding MRTS = K^2/3/L^2/3.

Suppose the slope of a short-run production function is given by 2/L^0.5. Which of the following statements is (are) TRUE?

Use the following to answer question: Figure 6.11 -(Figure 6.11) Which of the following statements is (are) TRUE?

Suppose a firm with a production function given by Q = K^0.25L^0.75 produces 1,500 units of output. The firm pays a wage of $50 per unit and pays a rental rate of capital of $50 per unit. (Note: ). To minimize the cost of producing 1,500 units of output, the firm should use:

A basic assumption of the short run is that a firm:

Suppose that a furniture manufacturer produces tables. The manufacturer's production function is Q(K,L) = 2K^0.8L^0.2, where K is the number of wood saws and L is the number of labor hours used to produce tables. The prevailing wage rate is $10 per hour and the rental rate associated with wood saws is $50. The manufacturer has a goal to produce 1,000 units. What Lagrangian equation can be used to solve the manufacturer's cost minimization problem?