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##### ECO500 Week 4-A firm?s product sells for \$4 per unit in a highly competitive market

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Question;A firm?s product sells for \$4 per unit in a highly competitive market. The firm produces outputusing capital (which it rents at \$25 per hour) and labor (which is paid a wage of \$30 per hourunder a contract for 20 hours of labor services). Complete the following table and use thatinformation to answer the questions that follow.Instruction: Round your answers for Average Product of Capital and Average Product of Laborto 2 decimal places.(1)(2)(3)CapitalLaborOutput0200120202030042040052045062047572047582045092040010203001120(6)(7)Value MarginalMarginalAverageAverageProduct ofProduct ofProduct of Product ofCapitalCapitalCapital APK Labor APLMPKVMPK1503(5)502(4)150--a. Identify the fixed and variable inputs.Labor is the fixed input and capital is the variable input.Capital and labor are variable inputs.Capital is the fixed input and labor is the variable input.--Capital and labor are fixed inputs.b. What are the firm's fixed costs?\$c. What is the variable cost of producing 475 units of output?\$d. How many units of the variable input should be used to maximize profits?e. What are the maximum profits this firm can earn?\$f. Over what range of the variable input usage do increasing marginal returns exist?From tog. Over what range of the variable input usage do decreasing marginal returns exist?From toh. Over what range of input usage do negative marignal returns exist?From toProblem 05-04 (Algo)An economist estimated that the cost function of a single-product firm is:C(Q) = 120 + 25Q + 30Q2 + 5Q3.Based on this information, determine the following:a. The fixed cost of producing 10 units of output.\$b. The variable cost of producing 10 units of output.\$c. The total cost of producing 10 units of output.\$d. The average fixed cost of producing 10 units of output.\$e. The average variable cost of producing 10 units of output.\$f. The average total cost of producing 10 units of output.\$g. The marginal cost when Q = 10.\$Problem 05-16 (Algo)The World of Videos operates a retail store that rents movie videos. For each of the last 10 years,World of Videos has consistently earned profits exceeding \$36,000 per year. The store is locatedon prime real estate in a college town. World of Videos pays \$2,300 per month in rent for itsbuilding, but it uses only 50 percent of the square footage rented for video rental purposes. Theother portion of rented space is essentially vacant. Noticing that World of Videos only occupies aportion of the building, a real estate agent told the owner of World of Videos that she could add\$1,650 per month to her firm?s profits by renting out the unused portion of the store. While theprospect of adding an additional \$1,650 to World of Videos?s bottom line was enticing, the ownerwas also contemplating using the additional space to rent video games. What is the opportunitycost of using the unused portion of the building for video game rentals?\$

Paper#56964 | Written in 18-Jul-2015

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