Micro tut 6 Class Problems - Business Microeconomics...

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Business Microeconomics, Tutorial 6 CFO: POM, 9 th edition Chapter 7 The Production Process : The Behavior of Profit-Maximizing Firms + pp322-323 MP: M, 9 th ed. Chapter 10. Organizing Production Tutorial 6 Organizing Production Problems and Applications: 1. . The following table gives total output or total product as a function of labor units used. LABOR TOTAL OUTPUT 0 0 1 5 2 9 3 12 4 14 5 15 a. Define diminishing returns. b. Does the table indicate a situation of diminishing returns? Explain your answer. 2. Suppose that widgets can be produced using two different production techniques, A and B. The following table provides the total input requirements for each of five different total output levels. a. Assuming that the price of labor (P L ) is $1 and the price of capital (P K ) is $2, calculate the total cost of production for each of the five levels of output using the optimal (least- cost) technology at each level. b. How many labor hours (units of labor) would be employed at each level of output? How many machine hours (units of capital)?
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