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Employ the following information on hypothetical short-run production function to answer questions a-d.
Units of Labor/Day 5 6 7 8 9
Units of Output/Day 120 140 155 165 168
The price of labor is $20 per day. Ten units of capital are used each day, regardless of output level. The price of capital is $50 per unit.
a. Compute the marginal and average variable product of each unit of labor input. Hint: plot your Units of labor and Units of Output vertically.
b. Calculate total, average total, average variable, and marginal costs.
c. Can you tell where diminishing marginal returns sets in?
d. Graph the resulting cost curves similar to the graph 5.2 on Page 141 of the textbook.
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Johnston production is the price taker which utilizes this cost structure in the short run:
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A refuse recycling operation is considering installing some additional magnetic sorting equipment which will protect the processing equipment from damage. Three alternative systems have been identified, each of which is estimated to save the compa..
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Assume the economy starts at equilibrium and the mpc=.8. What would be the effect of the $500 increase in taxes (once all the rounds of the mulyiplier process are complete) in relation to equilibrium output?
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Compute real GDP for 2004 and 2005 using 2004 prices. By what percent did real GDP grow? Compute the value of the price index for GDP for 2005 using 2004 as the base year. By what percent did prices increase?
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