Week 4 Homework
Chapter 6: #4
An explicit cost is the monetary payment a firm must make to an outsider to obtain a resource. An implicit cost is the monetary income a firm sacrifices when it uses a resource it owns rather than supplying the resource in the market. Say you owned a deli shop. Examples of explicit costs would be the salaries of your employees, the cost of the building (electricity, plumbing, etc.) and all the different ingredients and foodstuffs you need to purchase in order to make the sandwiches. Examples of implicit costs is the opportunity costs of running such an establishment – the things you could have purchased if you hadn’t invested the time and money into the deli.
Explicit costs of going to college would be tuition, cost of books, cost of gas to and from college (or cost of room and board if staying on campus). Implicit costs would be the opportunity costs like working full-time, having two jobs, starting a family, etc.
Chapter 6: #6
Which of the following are short-run and which are long-run adjustments? A. Wendy’s builds a new restaurant. This would be a long-run adjustment, because Wendy’s is adjusting its plant capacity. B. Harley-Davidson Corporation hires 200 more production workers. This would be a short-run adjustment. Harley-Davidson’s plant capacity is fixed, yet it can vary the output by hiring these new workers. C. A farmer increases the amount of fertilizer used on his corn crop. This would be a long-run adjustment. The farmer is most likely making this decision because of sustained increases or decreases in demand for his product. So this affects his means of production. D. An Alcoa aluminum plant adds a third shift of workers. Same with B, this is a short-run adjustment because a change in labor can vary the company’s output, but the plant capacity is fixed.
Chapter 6. #7
In order to find the marginal product we take the change in total product/change in labor input....