16. Suppose the short-run production function is q- 20 *L. If the wage rate is $

Question

16. Suppose the short-run production function is q- 20 *L. If the wage rate is $10 per unit of labor, thein AVC equals L. If the wage rate is $10 per unit of labor, then 17. Suppose the short-run production function is q 40 MC equals 18. Suppose that at a firm's current level of production the marginal product of capital is equal to 10 units, while the marginal rate of technical substitution between capital and labor is 3. Given this, we know the marginal product of labor must be 19. Suppose output for a simple production process is given by Q-2K + L, where K denotes capital, and L denotes labor. The price of labor is $3 per unit and the price of capital is $4 per unit. What would be the minimum costs of producing 10 units of output? 20. Joe's demand for spring water can be represented as Q = 15-p (where p is measured in $/gallon and Q is measured in gallons). He recently discovered a spring where water can be obtained free of charge. His consumer surplus from this water is 21. Without restrictions, the market supply curve is horizontal at P-6, and the inverse demand curve for taxi cab rides is P = 20-Q in a competitive market. Subsequently, only 10 taxi cabs are allowed in the market. After the market adjusts to the restricted supply, A) there will be a decrease in consumer surplus B) the remaining taxi cab drivers will make positive economic profits C) there will be an increase in producer surplus. D) All of the above.

Explanation / Answer

16- NOW FROM THE SHORT RUN PRODUCTION FUNCTION WE CAN CALCULATE THE LABOUR FUNCTION IN TERMS OF OUTPUT

THUS L = Q/20

AND COST = WL = Q/2

NOW AVC = VC/Q = 1/2

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