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It can use various combinations of capital and labor: intensive labor with hand shovels, less labor with snow blowers, and still less labor with a pickup truck that has a snowplow on front. To summarize, the method Choices are: Method 1: 50 units of labor, 10 units of capital Method 2: 20 units of labor, 40 units of capital Method 3: 10 units of labor, 70 units of capital If hiring labor for the winter costs $100/unit and a unit of capital costs 400, what is the best production method? What method should the company use if the cost of labor rises to $20/unit?

If two painters can paint 200 square feet of wall in an hour, and three painters can paint 275 square feet, what is the marginal product of the third painter?. Suppose you have a team of two workers: one is a baker and one is a chef

– Identify economies of scale, diseconomies of scale, and constant returns to scale. – Interpret graphs of long-run average cost curves and short-run average cost curves

The long run is the period of time when all costs are variable. The long run depends on the specifics of the firm in question—it is not a precise period of time

A firm can build new factories and purchase new machinery, or it can close existing facilities. In planning for the long run, the firm will compare alternative production technologies (or processes).

The marginal cost of production describes the amount of money it costs to increase production by one more unit of whatever good you are making.. The marginal cost of production is the incremental costs that you incur to produce one more unit of production

In most cases, the marginal cost of production increases as production increases. That’s because businesses tend to use up their lowest-cost options first

Take the fictional company XYZ Toys, which makes toys. Manufacturing a batch of 1,000 toys requires $800 worth of materials and three people working an eight-hour shift at $20 per hour

Diminishing marginal product suggests that the marginal a cost. Diminishing marginal product suggests that the marginal a

product of an extra worker is less than the previous worker’s marginal product. product of an extra worker is greater than the previous worker’s marginal product.

This is because as the input rises, the total product or output rises first at a rising rate and then at a declining rate. So, more and more input addition will cause the output to grow at a lower and lower rate

Which of the following is not held constant while moving along the supply curve? A. Which of the following is not held constant while moving along the supply curve?

The quantity of goods or services that are available for selling in the market at the price prevailing in the market is the supply of that good or service. This change in supply with respect to change in price is depicted using the supply curve.

The correct answer is (C) the price of the good itself.. The supply curve denotes the number of goods that the producers will be willing…

We are now going to focus on the what is behind the supply curve. Total revenue is equal to price times quantity and we examined their relationship in the elasticity section

In order to produce, we must employ resources, i.e., land, labor, capital, and entrepreneurship. What happens to output as more resources are employed?

For demonstration purposes in economics, we often make widgets, which is really any hypothetical manufactured device. Our widget will be made taking a quarter sheet of paper, folding it in half twice then stapling it and writing the letter W on it

Get 5 free video unlocks on our app with code GOMOBILE. In moving along a supply curve which of the following

A perfectly competitive firm’s supply curve follows the upward-sloping segment of its marginal cost curve above thea. Suppose that a competitive market is initially inequilibrium

the long-run market supply curve will be upwardsloping.b. the long-run market supply curve will be perfectlyelastic.c

– Explain the concept of the production possibilities curve and understand the implications of its downward slope and bowed-out shape.. – Use the production possibilities model to distinguish between full employment and situations of idle factors of production and between efficient and inefficient production.

An economy’s factors of production are scarce; they cannot produce an unlimited quantity of goods and services. A production possibilities curve is a graphical representation of the alternative combinations of goods and services an economy can produce

To construct a production possibilities curve, we will begin with the case of a hypothetical firm, Alpine Sports, Inc., a specialized sports equipment manufacturer. Christie Ryder began the business 15 years ago with a single ski production facility near Killington ski resort in central Vermont

This article needs additional citations for verification. In economics, diminishing returns are the decrease in marginal (incremental) output of a production process as the amount of a single factor of production is incrementally increased, holding all other factors of production equal (ceteris paribus).[1] The law of diminishing returns (also known as the law of diminishing marginal productivity) states that in productive processes, increasing a factor of production by one unit, while holding all other production factors constant, will at some point return a lower unit of output per incremental unit of input.[2][3] The law of diminishing returns does not cause a decrease in overall production capabilities, rather it defines a point on a production curve whereby producing an additional unit of output will result in a loss and is known as negative returns

The modern understanding of the law adds the dimension of holding other outputs equal, since a given process is understood to be able to produce co-products.[4] An example would be a factory increasing its saleable product, but also increasing its CO2 production, for the same input increase.[2] The law of diminishing returns is a fundamental principle of both micro and macro economics and it plays a central role in production theory.[5]. The concept of diminishing returns can be explained by considering other theories such as the concept of exponential growth.[6] It is commonly understood that growth will not continue to rise exponentially, rather it is subject to different forms of constraints such as limited availability of resources and capitalisation which can cause economic stagnation.[7] This example of production holds true to this common understanding as production is subject to the four factors of production which are land, labour, capital and enterprise.[8] These factors have the ability to influence economic growth and can eventually limit or inhibit continuous exponential growth.[9] Therefore, as a result of these constraints the production process will eventually reach a point of maximum yield on the production curve and this is where marginal output will stagnate and move towards zero.[10] Innovation in the form of technological advances or managerial progress can minimise or eliminate diminishing returns to restore productivity and efficiency and to generate profit.[11]

The population size on Earth is growing rapidly, but this will not continue forever (exponentially). Constraints such as resources will see the population growth stagnate at some point and begin to decline.[6] Similarly, it will begin to decline towards zero but not actually become a negative value, the same idea as in the diminishing rate of return inevitable to the production process.

Note: These notes are preliminary and incomplete and they are not guaranteed to be free of errors. Please let me know if you find typos or other errors.

The graph above shows the production function as a function of K holding A and N fixed.. Example: Cobb-Douglas constant returns to scale production function

To see that the Cobb-Douglas exhibits this property, note that. For US data, from the national income and product accounts, we know that labor’s share of income is about 0.7 which implies that for the US 1-a = 0.7 and a = 0.3.

This is “The Demand for Labor”, section 12.1 from the book Economics Principles (v. For details on it (including licensing), click here.

See the license for more details, but that basically means you can share this book as long as you credit the author (but see below), don’t make money from it, and do make it available to everyone else under the same terms.. This content was accessible as of December 29, 2012, and it was downloaded then by Andy Schmitz in an effort to preserve the availability of this book.

However, the publisher has asked for the customary Creative Commons attribution to the original publisher, authors, title, and book URI to be removed. Additionally, per the publisher’s request, their name has been removed in some passages

Imagine you own a company, and you are to determine the costs you face. You will begin by looking at the company’s total cost and dividing it between the fixed cost you have which you can’t avoid and some other variable costs that you can sometimes avoid

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You will begin by looking at the company’s total cost and dividing it between the fixed cost you have which you can’t avoid and some other variable costs that you can sometimes avoid. Do you think the shape of these cost curves is the same in the short and long run?

Our editors will review what you’ve submitted and determine whether to revise the article.. – consumer surplus elasticity supply curve demand curve indifference curve

It is the main model of price determination used in economic theory. The price of a commodity is determined by the interaction of supply and demand in a market

In equilibrium the quantity of a good supplied by producers equals the quantity demanded by consumers.. The quantity of a commodity demanded depends on the price of that commodity and potentially on many other factors, such as the prices of other commodities, the incomes and preferences of consumers, and seasonal effects

Figure 8.1 shows the number of jackets Acme can obtain with varying amounts of labor (in this case, tailors) and its given level of capital. A total product curveshows the quantities of output that can be obtained from different amounts of a variable factor of production, assuming other factors of production are fixed.

These values are then plotted graphically as a total product curve.. Notice what happens to the slope of the total product curve in Figure 8.1

Between 3 and 7 workers, the curve continues to slope upward, but its slope diminishes. Beyond the seventh tailor, production begins to decline and the curve slopes downward.

In our introductory lecture on Structural Adjustment we discussed various policies that countries are adopting all around the word to promote economic growth (increasing output rather than increasing their ability) and achieve productive and allocative efficiency. It is hoped that as economies move away from command economies (Chapter 23) toward mzrket economies or capitalism (chapter 4).

We will study supply and demand in this “Macroeconomics of the Gloabal Econaomy” course to better understand why there is a worldwide movement to remove price controls and let Supply and Demand determine prices.. By doing this they help the economy maintain allocative efficiency and productive efficiency.

When the price increased two things happened: (1) plywood was rationed to its most important uses (not doghouses or decks), and (2) the high prices were an incentive for more plywood to be guided to Florida so that they had more plywood. If the price of plywood was kept too low the result was allocative inefficiency (a shortage).