Consider a firm that uses labor and capital to produce output x using a homothetic production technology that has increasing returns to scale when output lies between 0 and xA, constant returns to scale when output lies between xA, and xB, and decreasing returns to scale when output exceeds xB (where 0
What will be an ideal response?
b. Input bundle B an the cost-minimizing ray are pictured above, and the vertical slice along this ray is pictured in the second panel above.
c. Only production plans on the decreasing returns to scale portion of the cost-minimizing ray of input bundles could be profit-maximizing. (See graph below.)
d. At
e. The set of input bundles that could contain the new profit maximizing bundle is the shaded area in the graph below. An increase in r causes substitution away from capital and toward labor -- implying that all cost-minimizing bundles lie to the right of the original ray. When input prices rise, the profit-maximizing output level falls -- implying the profit maximizing input bundle at the higher r lies below the isoquant for x*. BUT it still has to fall on the decreasing returns to scale portion of the frontier -- implying it must lie above the isoquant through B.
f. Price p increases in the long run -- thus less output is demanded in the market. If the number of firms increases, that means each firm must produce less than x* in the new equilibrium. But because price increases, each firm produces more than
along the new ray of cost-minimizing input bundles. This results in the new equilibrium input bundle on the darkened segment below.
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Between 1960 and 2011,
A) the male labor force participation rate decreased rapidly, the female labor force participation rate decreased slowly, and the two rates are now equal. B) the male labor force participation rate decreased and the female labor force participation rate increased. C) both the male and female labor force participation rates increased. D) both the male and female labor force participation rates decreased slowly. E) the male labor force participation rate did not change and the female labor force participation rate increased.
If a firm finds itself operating in Stage I, it implies that
A) variable inputs are extremely expensive. B) it overinvested in fixed capacity. C) it underinvested in fixed capacity. D) fixed inputs are extremely expensive.
If Happy Cows, a dairy firm, merges with Best Cartons, a manufacturer of dairy cartons, the merger can alter the relationship between Happy Cows and Best Cartons from a(n) ________ to a(n) ________.
A) managerial relationship; partnership B) adversarial relationship; partnership C) partnership; adversarial relationship D) partnership; managerial relationship
Investment in human capital implies:
a. investment on machines, technological development, and equipments. b. expenses on education. c. expenses on paying interest for hiring real capital. d. expenses on the purchase of land. e. profit of the entrepreneurs.