Economics Answers

How is the short run difined in production theory and how does it differ from the long run?

Suppose "x" nation has a closed economy and nation "y" has an open economy , how could these nations determine the amount of spending ?

The marginal product of labour function for International Trading Inc. is given by the equation 

                                           MP_L = 10 K^0.5

                                                        L^0.5

Currently, the firm is using 100 units of capital and 121 units of labour. Given the very specialized nature of the capital equipment, it takes six to nine months to increase the capital stock, but the rate of labour input can be varied daily. If the price of labour is $10 per unit and the price of output is $2 per unit, is the firm operating efficiently in the short run? If not, explain why, and determine the optimal rate of labour input. 

Use the production function Q = 10K^0.5 L^0.6  to complete the following production table

Rate of Capital Input(K)

 6 24.5 56.3 71.8

5

4 30.3

3 45.5

2 27.3

1 10.0 29.3

1 2 3 4 5 6

  Rate of Labour Input (L)

a) For this production system, are returns to scale decreasing, constant, or increasing? Explain.

b) Suppose the wage rate is $28, the price of capital also is $28 per unit, and the firm currently is producing 30.3 units of output per period using four units of capital and two units of labour.Is this an efficient resource combination? Explain. What would be a more efficient (not necessarily the best) combination? Why? (HINT: Compare the marginal products of capital and labour at the initial combination.)

Is there an inflationary or deflationary gap and what is the size?

By how much would government expenditure have to change to close the gap? (assuming no shifts in other injections or withdrawals?

1. What is the government expenditure multiplier? (assume that all expenditure in made on domestically produced goods)

Assume that full employment is achieved at a level of national income of $200 billion

Does the economy meet inflation target set out by the SARB? Calculate the inflation rate to substantiate your answer

find MR , TR ,Q*, P*

1. Q= 25-2p

2. P = 100-10Q

3. 50- 0.5 P

4. 10-0.1Q

illustrate and briefly explain the relationship between marginal cost and average cost curves