e360_apape_hw3

e360_apape_hw3 - Economics 360 Microeconomic Theory...

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1 Economics 360: Microeconomic Theory Binghamton University Department of Economics Fall, 2008 Problem Set #3 1. Roy Dingbat is the manager of a hot dog stand that uses only labor and capital to produce hot dogs. The firm usually produces 1,000 hot dogs a day with 5 workers and 4 grills. One day a worker is absent but the stand still produces 1,000 hot dogs. What does this imply about the 1,000 hot dog isoquant? Draw this part of the isoquant. What does this imply about Roy’s management skills? 2. 2a. Explain the difference between returns to an input (such as Labor) and returns to scale. 2b. Is it possible for a production function which takes, for example, Labor and Capital as inputs, to have both: a. Diminishing returns to Labor and diminishing returns to Capital, AND b. Increasing returns to scale. If it is possible, explain why. If it is impossible, also explain why. 3. Digging clams by hand in Sunset Bay requires only labor input. The total number of clams obtained per hour (q) is given by
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e360_apape_hw3 - Economics 360 Microeconomic Theory...

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