panal1a - 140 how many ounces of nutrient will be applied 4...

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Additional Problem 1 Answers: Production Analysis 1. A gardenia grower applies successive units of a soil nutrient (the variable input) to his/her gardenias (the fixed factor) and determines the following yield (total output) in dozens of gardenias. Nutrient (ounces) Gardenias (TP) (dozens) Marginal Output (MP) Average Output (AP ) 0 0 1 50 50 50 2 90 40 45 3 120 30 40 4 140 20 35 5 150 10 30 6 155 5 25.83 7 158 3 22.57 a. Does this production function exhibit increasing, decreasing, constant returns, or some combination of the three? decreasing b. Assuming the price per dozen of gardenias is $20 and the application of an ounce of nutrient costs $400 per ounce, if the gardenia grower behaves in a profit maximizing manner, how many dozens of gardenias will be produced (TP)
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Unformatted text preview: 140 ; how many ounces of nutrient will be applied? 4 ; what will be the gardenia growers’ profit at this output level? $1200 . c. What is the social optimum in terms of dozens of gardenias (i.e. largest average production (AP) per ounce of nutrient)? 50 . d. Now assume the price of an ounce of nutrient falls to $100 per ounce. What is the new profit maximizing total output (in dozens of gardenias)? 155 . How many applications of the nutrient are employed at this level? 6 . e. As a result of this cost decrease have profits fallen or risen? risen . By how much? $1300 ....
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This note was uploaded on 10/26/2009 for the course ECON 180-004-20 taught by Professor Bresnock during the Fall '09 term at UCLA.

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