ECON 1011 Lecture Notes - Lecture 17: Fixed Cost, Variable Cost, Marginal Product

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23 Oct 2018

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ECON 1011 Lecture Notes - Lecture 16: Demand Curve, Lead, Fixed Cost

ECON 1011 Lecture Notes - Lecture 17: Fixed Cost, Variable Cost, Marginal Product

ECON 1011 Lecture Notes - Lecture 18: Fixed Cost, Variable Cost, Marginal Product

Document Summary

Types of inputs: fixed input, do not change with the quantity produced, we call them capital (shown as k , variable input, changes based on the quantity produced, we call this labour (shown as l ) Short run production function: k is fixed, l is variable. The amount of production you get by adding 1 unit of labour to the process. On the graph, imagine a point l and another point l+1 on the x-axis. By drawing a tangent to the curve at point l, we see that the output from l to l+1 on the tangent is slightly higher than on the curve. Therefore, the marginal product of labour is the slope of the curve at a certain point. Let"s say we want to invest more capital. Therefore, the graph would have a steeper slope. Old line with initial k = red line. New line with higher k = blue line. Now imagine capital (eg. number of stores) decreases.

Related Questions

Given the following production function, where K (capital) and L (labor), that cost the firm r (rental rate) and w (wage).

Q = 3L^2/3K^2/3

Write down the expression for the production function where fixed capital level is 125 units and only input level that firm can vary is labor.

Based on 1, find MPL and APL.

Find FC, VC(q), AC(q) and MC(q) using information from part 1 and 2. Do these curves describe the firm in the short run or long run?

If a $100 fee is imposed on the company, regardless of production. What are the new values of FC, VC(q), AC(q), and MC(q)?

Imagine that the same firm is free to select any quantity of capital and labor it wants, what types of returns to scale will it experience?

redlion644

Q1) Soundscape Enterprises manufactures Sonoblast, a device that produces a high-pitched reminder to telemarketers that they have once again disturbed you just when you were sitting 1â2 down to dinner. The production function for Sonoblasts is given by the formula Q = 2KL where Q is in units of output per period, K is in machine-weeks per period, and L is in labour- weeks per period. The machine rental rate r is $512 per machine-week and the wage rate w is $128 per labour-week. In the short run, K is fixed at 4 machine-weeks per period.

a. Give the formulas for the short-run production function and the marginal product of labour (MPL) function.

b. Express variable cost (VC), total cost (TC), and marginal cost (MC) as functions of L and as functions of Q; and average variable cost (AVC), average fixed cost (AFC) and average total cost (ATC) as functions of Q.

c. At what level of Q is ATC minimized? What are the values of ATC and of MC at this level of output?

d. If K is increased to a fixed 16 units, at what level of Q is ATC minimized, and what are the values of ATC and of MC at this level of output?

e. In the long run, with all inputs variable, what is the optimal K/L ration with input prices unchanged? How many units of L and of K would be required to produce the levels of output in 1c and in 1d and what is the average cost of producing Sonoblasts in each case? Explain the relation between your results here and those for 1c and 1d.

lilacchinchilla474

The law of eventually diminishing marginal returns: (Points : 1)

a. states that each and every increase in the amount of the variable factor employed in the production process will yield diminishing marginal returns.
b. is a mathematical theorem that can be logically proved or disproved
c. is the rate at which one input may be substituted for another input in the production process
d. None of the above

The marginal product is defined as: (Points : 1)

a. the ratio of total output to the amount of the variable input used in producing the output
b. the incremental change in total output that can be produced by the use of one more unit of the variable input in the production process
c. the percentage change in output resulting from a given percentage change in the amount of the variable input X employed in the production process with Y
d. None of the above

The rate at which one input X may be substituted for another input Y in a production process, while total output remains constant, is: (Points : 1)

a. the slope of the isoquant curve
b. the marginal rate of technical substitution

c. equal to MPx/MPy

d. all of the above
e. none of the above

Marginal revenue product is: (Points : 1)

a. defined as the amount that an additional unit of the variable input adds to the total revenue
b. equal to the marginal factor cost of the variable factor times the marginal revenue resulting from the increase in output obtained
c. equal to the marginal product of the variable factor times the marginal product resulting from the increase in output obtained
d. a and b
e. a and c

Marginal factor cost is defined as the amount that an additional unit of the variable unit of the variable input adds to ____________. (Points : 1)

a. marginal cost
b. variable cost
c. marginal rate of technical substitution
d. total cost
e. none of the above

In the Cobb-Douglas production function Q=aL^?1.K^?2 ______________. (Points : 1)

a. the marginal product of labor (L) is equal to ?1
b. the average product of labor (L) is equal to ?2
c. if the amount of labor input (L) is increased by 1 percent, then output will increase by ?1 percent
d. a and b
e. a and c