question
C/q
answer
how do you find average cost?
question
write out the long run production function
substitute 5 for K and simplify
substitute 5 for K and simplify
answer
you're given the long run production function
K = 5
how do you solve for the short run production function
K = 5
how do you solve for the short run production function
question
write out the short run production function
find the derivative
find the derivative
answer
how do you find the marginal product of labor?
question
q/L (q = the short run production function)
answer
how do you find the average product of labor
question
write out the short run production function
substitute 4 for L and solve for q
substitute 4 for L and solve for q
answer
if asked to find a quantity given a certain number of workers how do you solve?
example:
how many oil changes would a firm sell if they have 4 workers?
example:
how many oil changes would a firm sell if they have 4 workers?
question
2 ways to solve:
1) find the average product of labor for the current amount of workers given
find the average product of labor for one less than that number of workers
2) take the derivative of the average product of labor
next using the derivative equation plug in the original number of workers
next using the derivative equation, plug in one less number of workers
if this number is higher than the original number of workers this means the APL goes up when number of workers goes down
1) find the average product of labor for the current amount of workers given
find the average product of labor for one less than that number of workers
2) take the derivative of the average product of labor
next using the derivative equation plug in the original number of workers
next using the derivative equation, plug in one less number of workers
if this number is higher than the original number of workers this means the APL goes up when number of workers goes down
answer
if a company had to lay off one worker what happens to the average productivity of the remaining workers?
question
substitute (5) for L
substitute (10) for K
solve for the quantity = 6.60
substitute (10) for K
solve for the quantity = 6.60
answer
L .6 K .4 (K = 10) (L = 5)
short run prod. function = 2.51L .6
how many products can a firm provide with the given inputs?
short run prod. function = 2.51L .6
how many products can a firm provide with the given inputs?
question
C = wL + rK
the cost equals the wage x labor + price of capital x capital
the cost equals the wage x labor + price of capital x capital
answer
how do you find the total cost or production?
question
r x K (rK)
the price of capital x the number of capital given
if K = 10 and r = 20
fixed cost = rK = (20)10 = 200
the price of capital x the number of capital given
if K = 10 and r = 20
fixed cost = rK = (20)10 = 200
answer
how do you calculate the fixed cost?
remember that in the short run production function capital (K) is fixed because you're given a number for K
Labor (L) could be any number
remember that in the short run production function capital (K) is fixed because you're given a number for K
Labor (L) could be any number
question
L is variable
wages x labor (wL)
wages x the number of workers
if w = 5 and L = 10
variable cost = 5 x 10 - 50
wages x labor (wL)
wages x the number of workers
if w = 5 and L = 10
variable cost = 5 x 10 - 50
answer
how do you calculate the variable cost?
which is variable L or K?
which is variable L or K?
question
fixed cost/quantity = FC/q
fixed cost = rK
fixed cost = rK
answer
how do calculate AVERAGE fixed cost?
question
variable cost/quantity = VC/q
VC = wL
VC = wL
answer
how do you calculate AVERAGE variable cost
question
C/q = total cost/q
to calculate total cost = FC + VC = rK + wL
to calculate total cost = FC + VC = rK + wL
answer
how do you calculate average cost?
question
given: K.4 L.7
add the exponents
if > 1 means increasing returns to scale
if < 1 means decreasing returns to scale
if = 1 means a constant returns to scale
add the exponents
if > 1 means increasing returns to scale
if < 1 means decreasing returns to scale
if = 1 means a constant returns to scale
answer
how would you determine the returns to scale (RTS) given a production function?
question
take the derivative for L
answer
how do you solve for the marginal product of labor?
question
given K.4 L.7
the exponent for L is always "a"
the exponent for K is always "b"
regardless of the order they appear
shortcut = a (q/L) = .7 (q/L)
the exponent for L is always "a"
the exponent for K is always "b"
regardless of the order they appear
shortcut = a (q/L) = .7 (q/L)
answer
what is the shortcut method to solve for the marginal product of labor?
question
take the derivative for K
answer
how do you solve for the marginal product of capital?
question
b(q/L)
remember "b" is always the exponent for K
regardless of the order they appear
for K.4 L.7 = .4 (q/L)
remember "b" is always the exponent for K
regardless of the order they appear
for K.4 L.7 = .4 (q/L)
answer
what is the shortcut method to solve for the marginal product of capital?
question
-MPL (marginal product of labor)/MPK (marginal product of capital)
OR
- a/b (K/L)
OR
- a/b (K/L)
answer
how do you solve for the MRTS (marginal rate of technical substitution)?
question
wL + rK = C
answer
what is the cost equation?
question
take the derivative of cost
= wL + rK
= wL + rK
answer
how do you find marginal cost?
question
revenue - cost
= (price x quantity) - cost
if given a cost function use that for cost
= (price x quantity) - cost
if given a cost function use that for cost
answer
what is the profit equation?
question
K ^L^ = q (quantity)
^ = a for L and b for K
^ = a for L and b for K
answer
what is a production function?
question
example:
cost = 10L + 40K
constraint = 10 = k5L5
(for lagrangian set this to zero = 10 - K5L5)
set up lagrangian:
cursive L (L, K, cursive L) = 10L + 40K +
cursive L(10 - K5L5)
cost = 10L + 40K
constraint = 10 = k5L5
(for lagrangian set this to zero = 10 - K5L5)
set up lagrangian:
cursive L (L, K, cursive L) = 10L + 40K +
cursive L(10 - K5L5)
answer
how do you set up lagrangian equation
question
remember that the production function =
K (b exponent) and L (a exponent)
shortcut = aK/bL = w/r
K (b exponent) and L (a exponent)
shortcut = aK/bL = w/r
answer
how do you use the shortcut method to solve for L and K?
question
take the profit equation = revenue - cost
and take the derivative and set equal to zero
example:
p x q - (800 + 4q +0.25q2) For price = 34
= 34q -800 -4q - 0.25q2
= 30q -800 - 0.25q2
and take the derivative and set equal to zero
example:
p x q - (800 + 4q +0.25q2) For price = 34
= 34q -800 -4q - 0.25q2
= 30q -800 - 0.25q2
answer
how do you find the profit maximizing output (quantity)?
question
profit = revenue - cost
= (price x quantity) - (wL + rK)
= (price x quantity) - (wL + rK)
answer
how do you find profit?
question
...
answer
how do you find consumer surplus
question
revenue - variable costs
answer
how do you find producer surplus?
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
