Question: Suppose a firm is producing a product using two inputs, labor and capital. The firm is facing the following cost structure: The cost of labor

Suppose a firm is producing a product using two inputs, labor and capital. The firm is facing the following cost structure:

  • The cost of labor is $50 per unit and the cost of capital is $100 per unit.
  • The firm's production function is Q = 10L + 20K, where Q is the output, L is the number of units of labor used, and K is the number of units of capital used.

  1. What is the firm's marginal cost of production when it is using one unit of labor and no units of capital?

  2. What is the firm's marginal cost of production when it is using one unit of capital and no units of labor?

  3. Suppose the firm is currently producing 100 units of output. How many units of labor and capital is the firm using?

  4. Suppose the price of the firm's product is $200. At this price, will the firm choose to increase or decrease its production? Explain.

Step by Step Solution

★★★★★

3.43 Rating (156 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

The detailed answer for the above question is provided below The marginal cost of production is the ... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

Q:

Suppose a firm is equally likely to earn $2 million this year or lose $3 million. The firm faces a tax rate of 40% on each dollar of taxable income, and the firm pays no taxes on losses. In this...

Q:

Suppose a firm is considering investing in research that would lead to a cost-saving innovation. Assuming the firm can retain this innovation solely for its own use, will the additional profits from...

Q:

A firm is producing a product using only labor and physical capital. The price of labor (wage rate) is $ 20/hour, and the cost of capital is $ 60/hour. If the marginal product of labor is 100 units...

Q:

Suppose there are two inputs in the production function, labor and capital, and these two inputs are perfect substitutes. The existing technology permits 1 machine to do the work of 3 workers. The...

Q:

Spoilage with Three Departments-Weighted Average Method Ballinger Paper Products manufactures a high quality paper box. The box department applies two separate operations-cutting and folding. The...

Q:

Heritage Company manufactures a beautiful bookcase that enjoys widespread popularity. The company has a backlog of orders that is large enough to keep production going indefinitely at the plants full...

Q:

Essex Fuel Pumps sells its product directly to auto manufacturers as well as in the replacement market. The owner and CEO of the company, Claire Balderson, believes in keeping tight control over...

Q:

We have already determined the expected returns and standard deviations for both Supertech and Slowpoke. In addition, we calculated the deviation of each possible return from the expected return for...

Q:

Weekly Corp. makes two products: C and D. The following data have been summarized: The company plans to manufacture 200 units of each product. Calculate the product cost per unit for Products C and D...

Q:

Weighted Average, Two Departments (CPA, adapted) The Mantis Manufacturing Company manufactures a single product that passes through two departments: extruding and finishing-packing. The product is...

Q:

Question create an income statement and a Schedule of Cost of Goods Manufactured [in good form] with the numbers provided. Total Food Results for the year ended August 31, 2020 Revenue Discount...

Q:

Answer Exercise 3.3.1 for a. b. c. 2 04

Q:

Convert the Riemann sums described below into sigma notation. ( a ) A right - endpoint Riemann sum estimating the area under y = 5 x 3 + 2 between x = 0 and x = 2 4 0 using 3 0 rectangles o f equal...

Q:

Financial markets and intermediaries allow investors and businesses to reduce and reallocate risk. For a Fortune 500sized company provide 3 specific examples of how that reducing and reallocating...

Q:

Which of the following solvents is the more polar ? a) acetone (E=0.56); b) hexane (E 0.00); c) toluene (E 0.22); d) methanol (E 0.95) %3D

Q:

Q1. A 10kO NTC thermistor has a B value of 3455 between the temperature range of 25C and 100 'C. Calculate its resistive value at 25 "C and again at 100 C. Draw two point characteristics graph of...

Q:

The polar substance on polar adsorbent: a) it certainly has a small migration distance; b) it is most likely that it has a large migration distance; c) it is most likely that it has a small migration...

Q:

If an individual paid for someone to care for their child or another qualifying person so they and their spouse could work or look for work, they may be able to claim a credit for the expenses for...

Q:

Consider a firm that is perfectly competitive in its input and output markets. This firm produces a single homogeneous product using two inputs: labor (L) and capital (K). Both inputs (K and L) are...

Q:

Consider a firm that is perfectly competitive in its input and output markets. This firm produces a single homogeneous product using two inputs: labor (L) and capital (K). Both inputs (K and L) are...

Q:

(2) A firm produces output, Q, using two inputs, labor and capital according to the production function, F(L,K)=L1/3K2/3. Suppose that the firm needs to pay $2 for each unit of labor and $4 for each...

Q:

A production process using two inputs, labor and capital, can be written as: Q = 5LK; where O represents output per day (tons). The unit costs of inputs are $150 for labor (L) and $1,000 for capital...

Q:

Kindly help me solve these problems. Show step by step workings Problem 4 - Optimal production The Acme Corp produces widgets using labor (L) and capital (K) according to the production, Q = F(L, K)...

Q:

Answer the following a. Suppose the bank kiiows whether the rm built the new facility or not in the rst period when it offers a contract. Draw the game tree of this game. b. Find all sequential...