Thudd is a producer of concrete balloons. Its hourly production function is given by Q = 32K.5L.25. In the short run, its capital stock is fixed at 80 units.
Derive Thudd’s Labor Demand Function in the Short Run (when K=80)
Suppose the market price of a concrete balloon is $4, w = $10/hour, and r = $40.   How many workers will Thudd hire in the short run? How many balloons/hour will it produce?
In the Short Run, suppose the price for concrete balloons falls to $3. How many workers will Thudd hire in the short run? How many balloons/hour will it produce?
Suppose all prices are at the levels given in 1)b) above. In the long run, will Thudd want to increase or decrease K?
Suppose there are 9 other firms in the concrete balloon industry in addition to Thudd (for 10 total). Write down the Industry Labor Demand function (= S individual firm Labor Demand functions)
What wage rate would induce the industry to hire 60 workers in total, if the product price was $4?  
If the product price stayed at $4, what wage rate would induce the industry to hire 60 workers in total if the number of firms increased to 15?

Answer rating: 100% (QA)

Answer Part 1 In short run Q 32 x 8005 x L025 MPL dQdL 025 x 32 x 8005 L075 8 x 8... View the full answer