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answerstopracticequestions2spring2005

# answerstopracticequestions2spring2005 - Economics 302...

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Economics 302 Spring 2005 Answers to Practice Questions for Chapter 3 Multiple Choice Questions for a Quick Review: 1. a. 2. a. 3. b 4. d 5. c. 6. d. 7. a., b., and c. are not investment 8. a. 9. a. 10. a. 11. d. 12. c. 13. e. Problems: 1. a. Fill in the table below: # of Workers Units of Output Marginal Product of Labor (approximation using the change in output divided by the change in labor Marginal Product of Labor (calculate using calculus) Nominal Wage Real Wage 1 4 x x \$10 \$1 2 5.7 1.7/1 = 1.7 2*2 -1/2 = 1.42 \$10 \$1 3 6.9 1.2/1 = 1.2 2*3 -1/2 = 1.16 \$10 \$1 4 8 1.1/1 = 1.1 1 \$10 \$1 5 8.9 .9/1 = .9 2*5 -1/2 = .89 \$10 \$1 9 12 3.1/4 = .78 .67 \$10 \$1 16 16 4/7 = .57 .5 \$10 \$1 25 20 4/9 = .44 .4 \$10 \$1 36 24 4/11 = .36 .33 \$10 \$1 b. Graph this firm’s production function. Make sure you label the axes in your graph. When you graph this firm’s production function you will have labor on the x-axis and output on the y-axis. This firm experiences diminishing marginal product of labor so the curve will flatten out as you look at higher values of labor: the curve will have a positive slope. c. Draw a second graph beneath your first graph and label the horizontal axis with the same units as the horizontal axis from the first graph. On this second graph plot out the firm’s marginal product of labor. Label the vertical axis appropriately. When you graph this firm’s marginal product of labor curve it

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will be downward sloping since the marginal product decreases as additional units of labor are hired given the fixed level of capital. d. Yes. You can see this from the values in the above table. e. 4 units of labor since that is where the real wage rate is equal to the marginal product of labor.
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answerstopracticequestions2spring2005 - Economics 302...

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