MG 640 Managerial Economics Homework Assignment Week 5 Chapter 5: Production Process and Costs Quest

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MG 640 Managerial Economics

Homework Assignment

Week 5 Chapter 5: Production Process and Costs

Question 1

In competitive markets, individual businesses operate as
small sellers in the market Suppose eBay e-books $4 per unit in a highly
competitive market It produces e-books using capital (which it rents at $ 6
per hour) under a contract for 10 hours of capital services and labor is paid a
wage of $30 per hour Complete the following table and use that information to
answer the questions that follow

K L Q MPL APL APK VMPL

10 0 0

10 1 50

10 2 150

10 3 300

10 4 400

10 5 425

10 6 450

10 7 450

10 8 400

10 9 375

10 10 300

10 11 150

a Complete
the Table above

b Identify
and define the fixed and variable inputs WHY?

c What are
the firm’s fixed costs? WHY?

d Define
variable cost? What is the variable cost of producing 425 units of output? WHY

e How many
units of the variable input should be used to maximize profits? SHOW WORK

f What are
the maximum profits this firm can earn? SHOW WORK

g What is
diminishing marginal returns? Over what range of the variable input usage do
increasing marginal returns exist? WHY? A graph may also be useful

h Define
the value of marginal product of labor and then complete its column in the
table above

Question 2

There is no difference between the law of diminishing
marginal returns and the law of diminishing marginal rate of technical
substitution True or False Explain and
offer examples to further illustrate your explanation