Microeconomics Answers

A firm can manufacture a product according to the production function (LOI, LO2,

LOS, L06)

Q = F(K, L) = K 3/4 L 1/4

a. Calculate the average product of labor, APL, when the level of capital is fixed at 81

units and the firm uses 16 units of labor. How does the average product of labor

change when the firm uses 256 units of labor?

b. Find an expression for the marginal product of labor, MP L, when the amount of capi-

tal is fixed at 81 units. Then, illustrate that the marginal product of labor depends on

the amount of labor hired by calculating the marginal product of labor for 16 and 81

units of labor.

c. Suppose capital is fixed at 81 units. If the firm can sell its output at a price of $200

per unit of output and can hire labor at $50 per unit of labor, how many units of labor should the firm hire in order to maximize profits?

Explain different types of price elasticity of demand for health care.

what is demand and what are types of demand

What is demand? What does it mean supplier-induced demand? What makes this type of

demand different from other types of demand? Explain the reasons why supplier induced

demand is common in the health care market.

5. Summarize the behavior of U.S. federal government budget deficits and U.S. merchandise trade deficits since 1953. Does this behavior suggest a relationship between the two defi cits? Perhaps at some times and not at others?

3. There were several shifts in the output-inflation relationship over the 1953-2010 period. Explain the nature of these shifts.

ment of these rates over this period more closely resemble those of the 1970s or those of the 1950s and 1960s?

1. Provide examples of the types of policy questions that macroeconomists ask. Why would macroeconomists disagree on these questions?

9. Suppose a worker's income was $15,000 in 1960 and $45,000 in 2010. Using the GDP deflator as a price index, calculate whether the worker's real income had increased or decreased over this period.

8. Explain the concept of potential output. Why is potential output difficult to measure?