Week 4 – Check Your Understanding:
Chapter 7 Exercise 1, 6, 8, and 9
1. In the Deep Creek Mining Company example described in this chapter (Table 7.1), suppose again that labor is the variable input and capital is the fixed input. Specifically, assume that the firm owns a piece of equipment having a 500-bhp rating. a. Complete the following table:
|LABOR INPUT L (NO. OF WORKERS)|TOTAL PRODUCT TPL (=|MARGINAL PRODUCT MPL |AVAERAGE PRODUCT APL | | |Q) | | | |1 | | | | |2 | | | | |3 | | | | |4 | | | | |5 | | | | |6 | | | | |7 | | | | |8 | | | | |9 | | | | |10 | | | |
b. Plot the (i) total product, (ii) marginal product, and (iii) average product functions. c. Determine the boundaries of the three stages of production.
6. Consider that following short-run production function (where L = variable input, Q = output): Q = 10L – 0.5 L2
Suppose that output can be sold for $10 per unit. Also assume that the firm can obtain as much of the variable input (L) as it needs at $20...
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