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Economics of Enterprise
Consider the following short-run production function (where L = variable input, Q =
output):
Q = 6L3 – 0.4L3
a. Determine the marginal product function (MPL).
[1 marks]
b. Determine the average product function (APL).
[1 marks]
c. Find the value of L that maximizes Q.
[1 marks]
d. Find the value of L at which the marginal product function takes on its maximum
value.
[1 marks]
e. Find the value of L at which the average product function takes on its maximum
value.
[1 marks
output):
Q = 6L3 – 0.4L3
a. Determine the marginal product function (MPL).
[1 marks]
b. Determine the average product function (APL).
[1 marks]
c. Find the value of L that maximizes Q.
[1 marks]
d. Find the value of L at which the marginal product function takes on its maximum
value.
[1 marks]
e. Find the value of L at which the average product function takes on its maximum
value.
[1 marks
Economics of Enterprise
Question 4
a. Ethanol is again viewed as one part of a solution to the problem of shortages of
petroleum products. Ethanol is made from a blend of gasoline and alcohol
derived from corn or sugar cane. What would you expect the impact of this
program to be on the price of corn, soybeans and wheat? Discuss.
[6 marks]
b. Why invest capita in purely competitive industries with equilibrium margins that
are razor thin and entrants that erode quasi profits? Suppose volume is not
exceptionally large, why then?
a. Ethanol is again viewed as one part of a solution to the problem of shortages of
petroleum products. Ethanol is made from a blend of gasoline and alcohol
derived from corn or sugar cane. What would you expect the impact of this
program to be on the price of corn, soybeans and wheat? Discuss.
[6 marks]
b. Why invest capita in purely competitive industries with equilibrium margins that
are razor thin and entrants that erode quasi profits? Suppose volume is not
exceptionally large, why then?
Economics of Enterprise
The Blair Company’s three assembly plants are located in California, Georgia and New
Jersey. Previously, the company purchased a major subassembly, which becomes part
of the final product, from an outside firm. Blair has decided to manufacture the
subassemblies within the company and must now consider whether to rent one centrally
located facility (e.g., in Missouri, where all subassemblies would be manufactured) or to
rent three separate facilities, each located near one of the assembly plants, where each
facility would manufacture only the subassemblies needed for the nearby assembly
plant. A single, centrally located facility, with a production capacity of 18,000 units per
year, would have fixed costs of $900,000 per year and a variable cost of $250 per unit.
Three separate decentralized facilities, with production capacities of 8,000, 6,000 and
4,000 units per year, would have fixed costs of $475,000, $425,000 and $400,000,
respectively, and variable costs per unit of only $225 per unit, owing
Jersey. Previously, the company purchased a major subassembly, which becomes part
of the final product, from an outside firm. Blair has decided to manufacture the
subassemblies within the company and must now consider whether to rent one centrally
located facility (e.g., in Missouri, where all subassemblies would be manufactured) or to
rent three separate facilities, each located near one of the assembly plants, where each
facility would manufacture only the subassemblies needed for the nearby assembly
plant. A single, centrally located facility, with a production capacity of 18,000 units per
year, would have fixed costs of $900,000 per year and a variable cost of $250 per unit.
Three separate decentralized facilities, with production capacities of 8,000, 6,000 and
4,000 units per year, would have fixed costs of $475,000, $425,000 and $400,000,
respectively, and variable costs per unit of only $225 per unit, owing
Economics of Enterprise
Howard Bowen is a large-scale cotton farmer. The land and machinery he owns has a
current market value of $4 million. Bowen owes his local bank $3 million. Last year,
Bowen sold $5 million worth of cotton. His variable operating costs were $4.5 million;
accounting depreciation was $40,000, although the actual decline in value of Bowen’s
machinery was $60,000 last year. Bowen paid himself a salary of $50,000, which is not
considered part of his variable operating costs. Interest on his bank loan was $400,000.
If Bowen worked for another farmer or a local manufacturer, his annual income would be
about $30,000. Bowen can invest any funds that would be derived, if the farm sold, to
earn 10 percent annually. (Ignore taxes.)
current market value of $4 million. Bowen owes his local bank $3 million. Last year,
Bowen sold $5 million worth of cotton. His variable operating costs were $4.5 million;
accounting depreciation was $40,000, although the actual decline in value of Bowen’s
machinery was $60,000 last year. Bowen paid himself a salary of $50,000, which is not
considered part of his variable operating costs. Interest on his bank loan was $400,000.
If Bowen worked for another farmer or a local manufacturer, his annual income would be
about $30,000. Bowen can invest any funds that would be derived, if the farm sold, to
earn 10 percent annually. (Ignore taxes.)
Economics of Enterprise
Rufus (R), Otis (O), and Stella (S) are the owners of neighboring frozen yogurt stores in University
City and produce frozen yogurt cones (q). The frozen yogurt production process is fairly
standardized, so they all use the same inputs: frozen yogurt machines, M, with a rental price of $80
per machine and tubs of yogurt, Y, at price $. However, they each have their own “secret” method
for producing frozen yogurt and thus have different production functions:
a. Roughly sketch the isoquants for all three frozen yogurt stores with M on the y-axis. Label any
point on an isoquant representing an output of 60 cones of frozen yogurt.
b. If each store has 1 frozen yogurt machine in the short-run, what are their short-run cost
functions?
Now, assume that tubs of yogurt cost $5 each (the rental price of machines is still $80) and they are
in the long run so Rufus, Otis, and Stella can all vary the number of frozen-yog
City and produce frozen yogurt cones (q). The frozen yogurt production process is fairly
standardized, so they all use the same inputs: frozen yogurt machines, M, with a rental price of $80
per machine and tubs of yogurt, Y, at price $. However, they each have their own “secret” method
for producing frozen yogurt and thus have different production functions:
a. Roughly sketch the isoquants for all three frozen yogurt stores with M on the y-axis. Label any
point on an isoquant representing an output of 60 cones of frozen yogurt.
b. If each store has 1 frozen yogurt machine in the short-run, what are their short-run cost
functions?
Now, assume that tubs of yogurt cost $5 each (the rental price of machines is still $80) and they are
in the long run so Rufus, Otis, and Stella can all vary the number of frozen-yog
Economics of Enterprise
Pat operates a board game manufacturing company at which he produces and sells board games. Heproduces board games according to the following production function:
q=3K2/3 +3L2/3
.
where K is the number of machines to produce the games (his capital) and L is the number of
workers (his labor). The rental price of machines is 0 and the wage rate of workers is 1. Pat wishes
to minimize the cost necessary to produce his output.
a. Write down the Pat’s optimization problem.
b. Does this production function exhibit increasing, decreasing, or constant returns to scale?
c. Write down the marginal product for each input.
d. Are there diminishing marginal returns to capital? Labor?
e. Find the marginal rate of transformation (MRTS).
In the short run, Pat’s capital is fixed at -, = 1 (i.e. he only has one machine).
f. Find the short-run input demand function(s).
g. Find the short-run total cost function.
In the long run, both capital and labor are variable (i.e. Pat can adjust the number of machines a
q=3K2/3 +3L2/3
.
where K is the number of machines to produce the games (his capital) and L is the number of
workers (his labor). The rental price of machines is 0 and the wage rate of workers is 1. Pat wishes
to minimize the cost necessary to produce his output.
a. Write down the Pat’s optimization problem.
b. Does this production function exhibit increasing, decreasing, or constant returns to scale?
c. Write down the marginal product for each input.
d. Are there diminishing marginal returns to capital? Labor?
e. Find the marginal rate of transformation (MRTS).
In the short run, Pat’s capital is fixed at -, = 1 (i.e. he only has one machine).
f. Find the short-run input demand function(s).
g. Find the short-run total cost function.
In the long run, both capital and labor are variable (i.e. Pat can adjust the number of machines a
Economics of Enterprise
2.Using Excel or other calculation software, input the data you collected in criterion oneto calculate an estimated regression. Then, from the calculation provided, interpret the coefficient of determination indicating how it will influence your decision to open the pizza business. Explain any additional variables that may improve the coefficient of determination.
3.Test the statistical significance of the variables and the regression equation indicating how it will impact your decision to open the pizza business.
3.Test the statistical significance of the variables and the regression equation indicating how it will impact your decision to open the pizza business.
Economics of Enterprise
suppose oil prices rise sharply for years due to war. what happens and why to the demand of cars
Economics of Enterprise
how to graph a decrease in demand
Economics of Enterprise
Steven and Ed cousins who were born on the same day, both turned 25 today. Their grandfather began putting $2,500 per year in trust fund for steve on his 20th birthday, and he just made a 6th payment into the fund. The grandfather (or his estate's trustee) will make 40 more $2,500 payments until a 46th and final payment is made on Steve's 65th birthday.
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#340153 on Dec 2023
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