Quiz_3_Ec182A_Version_1_Answers

Quiz_3_Ec182A_Version_1_Answers - STATE UNIVERSITY OF NEW...

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STATE UNIVERSITY OF NEW YORK AT BUFFALO DEPARTMENT OF ECONOMICS Economics 182A, Spring 2008 Answers to Quiz Three, Version One Question 1: A firm uses machinery and labor to manufacture knives. The firm is free to choose how much labor it uses. The firm uses 5 machines and cannot alter this. The wage rate is w = $12 per labor unit and the rental rate is r = $40 per machine. Table 1 on the answer page presents the firm's production function. (i) Compute the marginal products of the firm’s labor units. Enter these values into the Marginal Product of Labor column of Table 1. Answer: See Table 1. (2 points if at most one error is made, 1 point if two or three errors are made, and 0 points otherwise.) (ii) In what unit is the marginal productivity of the firm’s labor units measured? Answer: Knives per labor unit. (1 point.) (iii) Approximately, what is the firm’s marginal cost of producing the 35 th knife? Remember to include the units of measurement in your answer. Answer: The 35 th knife is produced by the 6 th labor unit. 4 extra knives are produced by the 6 th labor unit. The extra cost of hiring the 6 th labor unit is $12 so, approximately, the
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This note was uploaded on 04/15/2008 for the course ECO 182 taught by Professor Morgan during the Spring '08 term at SUNY Buffalo.

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Quiz_3_Ec182A_Version_1_Answers - STATE UNIVERSITY OF NEW...

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