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Problem_Set_7_Answers

Problem_Set_7_Answers - 162 CHAPTER 7 TECHNOLOGIES COSTS...

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162 CHAPTER 7. TECHNOLOGIES, COSTS AND SUPPLY Answers to Problems on Firm’s Technologies, Production Costs & Supply Decisions. Answer to Problem 7.1. A firm produces a fine Western New York delicacy, the cardboard hamburger. Table 7.8 shows how the firm’s production of burgers varies with the quantity of labor hired. Table 7.8: The Firm’s Technology. Output Labor Marginal Average Level Input Productivity Productivity Of Labor Of Labor (burgers) (hours) (burgers/labor hour) (burgers/labor hour) 0 0 50 1 50 50 120 2 70 60 186 3 66 62 246 4 60 61 · 5 295 5 49 59 342 6 47 57 385 7 43 55 416 8 31 52 432 9 16 48 440 10 8 44 440 11 0 40 420 12 -20 35 (i) Compute the marginal physical productivities of the firm’s labor units and enter the values into the “Marginal Productivity of Labor” column of Table 7.8. Answer. See Table 7.8. (ii) In what unit is the marginal labor productivity measured? Answer. Burgers per labor hour. (iii) Where on a graph of total output versus labor used do you see the marginal physical productivities of labor represented or measured? Answer. The marginal physical productivities are the “steps up” or “steps down” in the heights on the output axis as the quantity of labor hours used is increased by one extra hour at a time. (iv) If you add up the marginal productivities of the first three labor hours, what do you get?
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163 Answer. The total output produced when three labor hours are used. (v) Your answer to part (iv) is a special case of the general statement that “If you add up the marginal physical productivities of the first L labor hours, then you get the total quantity of output produced when L labor hours are used. (vi) Now compute the average physical productivities of the firm’s labor units and enter the values into the “Average Productivity of Labor” column of Table 7.8. Answer. See Table 7.8. (vii) In what unit is the average labor productivity measured? Answer. Burgers per labor hour. (vii) What do you notice about the units in which the marginal and average produc- tivities of labor are measured? Answer. The marginal and average productivities of labor have the same unit of measurement. (ix) Look at the Marginal and Average Productivity of Labor columns of Table 7.8. Does adding an extra labor hour increase the average labor productivity only if the marginal productivity of the extra labor hour is larger than the average labor pro- ductivity without the extra labor hour? Answer. Yes. (x) Does adding an extra labor hour decrease the average labor productivity only if the marginal productivity of the extra labor hour is smaller than the average labor productivity without the extra labor hour? Answer. Yes. (xi) Explain your answers to parts (ix) and (x). Answer. The average productivity of labor when L labor hours are used is the total amount of output produced when L labor hours are used divided by L . It is, in other words, the average amount of output produced per labor hour used. Now total output when L labor hours are used is the sum of the marginal productivities of the first L
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