Week 4 – Check Your Understanding

Chapter 7:

1.      From the apprehension of the relationships natant the several genesis capacitys, finished the subjoined table: (3 points)

2.      The mix of fish caught per week on a trawler is a capacity of the herd magnitude assigned to have-effect the boat. Based on gone-by axioms, the subjoined genesis list was developed: (3 points)

Over what collocate of workers are there:

a.      Increasing ultimate profits  _______________________

b.      Decreasing ultimate profits _______________________

c.       Negative ultimate profits    ________________________

3.      Suppose the firm’s genesis capacity is consecrated by the subjoined relationship:

Q = 5 L ^0.8 K ^0.2

Where the exponents of L (labor) and K (capital) are interpreted as the urban input elasticities of strive and cardinal, respectively.

a.      Determine the percentage extension in output (Q) if strive (L) is extensiond by 10 % period cardinal is held continuous.

b.      Determine the percentage extension in output (Q) if cardinal (K) is extensiond by 20 % period strive is held continuous.

c.       Determine the percentage extension in output (Q) if twain strive (L) and cardinal (K) are extensiond by 20 %.

4.      Consider the subjoined Cobb Douglas Genesis capacity restraint the fellow-subject gait scheme in a point city: (3 points)

Q = aL^b1F^b2K^b3

Where L = strive input in worker hours

            F= fuel input in gallons

            K = cardinal input in mix of fellow-subjectes

            Q = output measured in millions of fellow-subject miles

The values of the parameters are: (Hint: See the exposition of the exponents in Question 3.)

a = 0.0024

b1 = 0.50

b2 = 0.30

b3 = 0.15

a.      Suppose that the strive input (L) is extensiond by 2% contiguous year (with the other inputs held continuous). Determine the resemble percentage veer in output (Q).

b.      Suppose that the cardinal input (K) is decreased by 2% contiguous year (with the other inputs held continuous). Determine the resemble percentage veer in output (Q).

c.       What symbol of profits to layer appears to specify this fellow-subject gait scheme?  (Hint: gather the exponents up. If the mix exceeds 1, there is increasing profits to layer, if it is short than 1, there is decreasing profits to layer, and if it correspondents 1, there is continuous profits to layer.)

Chapter 8:

1.  A regular genesis scheme employs barely strive (L).  Output (Q) is a capacity of strive consecrated by the subjoined relationship: (3 points)

Where MPL = 1200L – 300L²

            2.   During the ultimate scant days the Superior Company has been popular into problems with its computer scheme. The ultimate reach of the genesis consume list resulted in the infinished listing shown beneath. From your apprehension of consume speculation, replenish in the blanks. (6 points)