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##### ECO Problem Set #4 Assignment Solution

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Question;Problem Set #4 Production300703509360601. Optimal Use of a Single Input. Julian Smyth is manages production at Taft)'300Apple Inc., a company that produces a variety of tafty/fiuit candies. Over thelast several10months, he has varied then number of employees on his caran1el410 line, and found the following relationship.apple production50MRPLaborTP 250 MP11450402001248030150a. In the column labeled MP, calculate the mar?ginal product oflabor. (Note,make your first entry in row 6, as the change between 5 and 6 units oflabor)b. Suppose the apples sell tor $5 (per dozen) box. Calculate the MarginalRevenue Product (1\fRP)c. Iflabor costs $225 per day, how many laborers should the firm hire''Number-------------------------------------2. Optimal Use of a Single Input. A graphical representation.a. In the coordinate axes provided below, illustrate the general relationshipbetween MRP and the Price of Labor. IdentifY the equilibrium quantity oflabor to hire. (Not<:, your graph nc:ed not use the: numbc:rs in problem 3.Just be certain to include ranges that illustrate gains from specializationand the law of diminishing returns in your graph.$Qb. Suppose that the candy workers union agrees to way concessions, thatmake the price oflabor fall. In the coordinate axes below illustrate theetlect on the equilibrium quantity of labor$Qc. Finally. suppose that the price of caramel apples increases. Illustrate theeflt:ct of this ch mge on the equilibriwn quantity oflabor c:mployed.$Q3. Optimal use of multiple inputs. In his shop, Julian Valenti retrofits sunroof. intoautomobiles. 1l1e process can use a combination of skilled labor and unskilledlabor. Given his current mix of employees, the marginal product of the last unitof skilled labor is 3 sumoofs per day, and tht: marginal product of thelast unit of unskilled labor is 1 sunroof per day. CmTent market rates for skilledand unskilled labor are $40 and $10, respectively. Is Julian using a least costcombination of inputs? If not, which of type oflabor should he use relativelymore''Comparison Expression:_Result:_4. Retmns to Scale. Jake's Free Runoff Bottled Water Company Produces with theLong Run Production FunctionQ = (KL)2ila. Currentlv K = 4 and L = 4. IfJake's doubles inputs to K=8 md L=8, will it realizeincreasing,constant ordecreasmg retums to scale (circle one)''b. As a result does Jake's enjoyeconomies of scale,diseconomies of scale, or does Jake's appear t be operatingat Efficient Scale? (circle one)

Paper#56049 | Written in 18-Jul-2015

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