Answer to Question #201845 in Economics for Shahid

Question

Suppose that the output sells for $5 and the input sells for $4. Fill in the blanks in the following table.

x(input). y(output). vmp. avp

0 0.  ___ ___

10. 50 ___ ___

25 75 ___. ___

40 80 ___ ___

50. 85 ___. ___

2. In Problem 1, what appears to be the profit-maximizing level of input use? Verify this by calculating TVP and TFC for each level of input use as shown in the table.

3. Suppose that the production function is given by y = 2x0.5

The price of x is $3 and the price of y is $4. Derive the corresponding VMP and AVP functions. What is MFC? Solve for the profit-maximizing level for input use x.

4. When the input price is constant, the slope of the total factor cost function will also be constant. Is this statement true or false? Explain.

Answer 1

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