A firm has the following short-run production function: Q 5 50L 1 6L2 2 0.5L3 where Q 5 Quantity of output per week L 5 Labor (number of workers) a. When does the law of diminishing returns take effect? b. Calculate the range of values for labor over which Stages I, II, and III occur. c. Assume each worker is paid $10 per hour and works a 40-hour week. How many workers should the firm hire if the price of the output is $10? Suppose the price of the output falls to $7.50. What do you think would be the short-run impact on the firm’s production? The long-run impact?
A firm has the following short-run production function: Q 5 50L 1 6L2 2 0.5L3 where Q 5 Quantity of output per week L 5 Labor (number of workers) a. When does the law of diminishing returns take effect? b. Calculate the range of values for labor over which Stages I, II, and III occur. c. Assume each worker is paid $10 per hour and works a 40-hour week. How many workers should the firm hire if the price of the output is $10? Suppose the price of the output falls to $7.50. What do you think would be the short-run impact on the firm’s production? The long-run impact?
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The following table represents short run cost-revenue information (in dollars) for a firm in a competitive market.
|
Q |
P |
TR |
MR |
MC |
TC |
Total Profit |
|
0 |
N/A |
N/A |
600 |
|||
|
1 |
700 |
|||||
|
2 |
80 |
|||||
|
3 |
50 |
|||||
|
4 |
860 |
|||||
|
5 |
20 |
|||||
|
6 |
1000 |
|||||
|
7 |
1040 |
|||||
|
8 |
60 |
|||||
|
9 |
||||||
|
10 |
(a) Fill in all the blanks above using the following information: The Market Price is $100 per unit of output, the VC of producing 9 units of output is $570, and the ATC of producing 10 units of output is $270
(b) Where does diminishing returns start? Explain your answer.
(c) What is the Fixed Costs for this firm? Explain your answer.
(d) In the Short Run, if this firm would go into production, determine the profit maximizing (or loss minimizing) level of output and profit amount.
(e) In the Short Run, if this firm would instead shutdown without going into production, determine its production amount and profit amount.
(f) Please determine the best course of action for this firm in the Short Run.
(g) Based on the data above, in the Long Run, explain what this firm should do.
