Question

Easton Plate Glass sells glass for $3 per unit in a highly competitive market. The firm...

Easton Plate Glass sells glass for $3 per unit in a highly competitive market. The firm produces output using capital (which it rents at $75 per hour) and labor (which is paid a wage of $15 per hour under a contract for 20 hours of labor services). Complete the following table and use that information to answer the questions that follow.

L

K

Q

MPL

APL

APK

VMPL

0

40

0

1

40

75

2

40

225

3

40

450

4

40

550

5

40

600

6

40

612.5

7

40

620

8

40

625

9

40

500

10

40

350

11

40

100

a, Identify the fixed and variable inputs.

b, What are the firm’s fixed costs?
c, What is the variable cost of producing 600 units of output?
d, How many units of the variable input should be used to maximize profits?
e, What are the maximum profits this firm can earn?
f, Over what range of the variable input usage does increase marginal returns exist?

g, Over what range of the variable input usage do decrease marginal returns exist?

h, Over what range of input usage do negative marginal returns exist?

Homework Answers

Answer #1
L K Q MPL APL APK VMPL
0 40 0
1 40 75 75 75 1.875 225
2 40 225 150 112.5 5.625 450
3 40 450 225 150 11.25 675
4 40 550 100 137.5 13.75 300
5 40 600 50 120 15 150
6 40 612.5 12.5 102.0833 15.3125 37.5
7 40 620 7.5 88.5714 15.5 22.5
8 40 625 5 78.125 15.625 15
9 40 500 -125 55.5556 12.5 -375
10 40 350 -150 35 8.75 -450
11 40 100 -250 9.0909 2.5 -750

a) Capital is the Fixed input and Labor is the variable input

b) Firms fixed cost = capital*rent = 40*75 = 3000

c) VC of producing 600 units of output =labor*wages = 5*15 = 75

d) The firm will employ the labor until the VMPL = wage

As labor is the variable input and its wage = 15

so the firm will hire 8 labor

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Under competition, a firm sells printer ink for $2 per unit. The firm produces printer ink...
Under competition, a firm sells printer ink for $2 per unit. The firm produces printer ink using capital (which it rents at $ 20 per hour) and labor (which is paid a wage of $ 25 per hour under a contract for 10 hours of labor services. Complete the following table and use that information to answer the questions that follow. K L Q MPk APk APl VMPk 0 10 0 1 10 50 2 10 150 3 10 300...
Assume that labor (artist) and capital (robot) are perfect substitutes in producing an output (= painting)...
Assume that labor (artist) and capital (robot) are perfect substitutes in producing an output (= painting) for a firm. Marginal product of labor (MPL =APL ) is 15 paintings per day and the price of labor (PL) is $20/day. The MP of capital (MPK= APK ) is 20 paintings per day, and the rental rate of capital (PK) for one day is $40. What is the maximum output (= paintings) producible with TC = $600?    Answers: a) 300 painting...
Assume that labor (artist) and capital (robot) are perfect substitutes in producing an output (= painting)...
Assume that labor (artist) and capital (robot) are perfect substitutes in producing an output (= painting) for a firm. Marginal product of labor (MPL =APL ) is 20 paintings per day and the price of labor (PL) is $40/day. The MP of capital (MPK= APK ) is 15 paintings per day, and the rental rate of capital (PK) for one day is $20. What is the maximum output (= paintings) producible with TC = $1200?    a) 600 painting b)...
Janko Products produces and sells beach bags in a perfectly competitive market at a price of...
Janko Products produces and sells beach bags in a perfectly competitive market at a price of $8. They hire labor in a perfectly competitive market at an hourly wage of $9. The relationship between the quantity of labor hired and the amount of beach bags produced per hour is shown below: Labor Quantity MPL VMPL Wage Marginal Profit 0 0 1 3 2 7 3 10 4 12 5 13 Complete the table, how much labor should the firm hire?
Assume that labor (artist) and capital (robot) are perfect substitutes in producing an output (= painting)...
Assume that labor (artist) and capital (robot) are perfect substitutes in producing an output (= painting) for a firm. Marginal product of labor (MPL =APL ) is 20 paintings per day and the price of labor (PL) is $40/day. The MP of capital (MPK= APK ) is 15 paintings per day, and the rental rate of capital (PK) for one day is $20. What is the minimum total cost needed to produce 1200 paintings? a) $800 b) $1,200 c) $1,600...
The production function for a firm is Q = −0.6L 3 + 18L 2K + 10L...
The production function for a firm is Q = −0.6L 3 + 18L 2K + 10L where Q is the amount of output, L is the number of labor hours per week, and K is the amount of capital. (a)Use Excel to calculate the total short run output Q(L) for L = 0, 1, 2...20, given that capital is fixed in the short run at K = 1. (b) Use Excel to calculate the total long run output Q(L) for...
Question 5: The Eastern Company pays each worker it employs a wage of AED 600. Each...
Question 5: The Eastern Company pays each worker it employs a wage of AED 600. Each unit of output is sold at a price of AED 10. Answer the following questions:                                                                                                       A.  Fill in the empty cells in the table.                                                             (0.5x12= 6 marks) Number of workers Total Output Marginal Product of Labor (MPL) Value of Marginal Product of Labor VMPL = P x MPL Wage per Worker W Profit Margin (PM)PM=VMPL-Wage 0 0 - - - - 1 140 140 800 2...
2. The following table show the relationship between labor and output for a firm that is...
2. The following table show the relationship between labor and output for a firm that is using 100 units of capital (K). L 40 41 42 43 44 Q 1,000 1,018 1,035 1,051 1,066 a) Calculate the MPL and APL for labor units 41 through 44. b) The cost of one unit of K is $45 (r = 45) and the cost of one unit of labor is $30 (w = 30). Use these figures, the amount of capital you...
2. Consider a firm that sells output and buys labor in a competitive market. The firm’s...
2. Consider a firm that sells output and buys labor in a competitive market. The firm’s production function is given by q=K1/2L1/2 where q is the quantity of output, K is the amount of capital, and L is the number of labor hours.  The marginal product of labor is MPL=1/2K1/2L-1/2 .Suppose the amount of capital is fixed at 100 units (i.e., short-run). a.) If the output can be sold for $10 per unit and labor can be purchased for $5 per...
A firm uses two inputs, capital K and labor L, to produce output Q that can...
A firm uses two inputs, capital K and labor L, to produce output Q that can be sold at a price of $10. The production function is given by Q = F(K, L) = K1/2L1/2 In the short run, capital is fixed at 4 units and the wage rate is $5, 1. What type of production function is F(K, L) = K1/2L1/2 ? 2. Determine the marginal product of labor MPL as a function of labor L. 3. Determine the...