Economics

7

Ie 168 PART i MicroeconomicAnatysis

K

300

200-

| 200 50

100 1

a. What are the curu.ent prices of basecl on the graph?

b. Sr.rpposc that the price of labor firm wishes to continue to ievel of or.rtput,. lrow w.ili the choice change (rclative Support your answer: graph.

8. [Appendix

input t choice)?

following graph shows input choice at current

input choice.

c. How wiil cl'roice be diff, tors r_if production answer with n graph.

to thc firm's short-run cost

cost-minintizing input run, when all fac:-

? Support your

thc firm's factor pri units

$ 1 $

-A t{

$') \ J a

Application Questions 1. l)iscuss how the cxamples in the opening case

;.f3i trotl the choicelfacing a firm ,l.rkirg u ior.,g-

run rler:ision.onp.lant lclcation are ,nuch g.eater tvith a plant alreacly, in opera-

tion. is the lon! rul considered to be u plnr-r_ ning hor:izon?

2. In the clirrent business news metlia, find and dis_ of input

makers fecl contpeil

down factories, or mean shutting

ablc rates." I)o thesc s at unprofit-

economic: theory and show scale do not Lrenefit a firm if lcvel is Expiain. A 1964 sturiy the broiler chir:ken procoss_ ing industry wed that "proccssing costs dccreased with output size, brrt aftc,r

a. In the sh{xt run, 1hr: firur cannot change its level of capital. The pricc cif labor riscs to '$2i. if the finn wishes to continue to produce the current level of output, shou' the finn,.s short-run cost-

a. What does ilris graptrl6iii,rs" of er:onomies of scale in tirt: industryr?

b. What are the particuiar problcitrs associatccl with thc firm representert by the SX?,C curve shown in the graph? Does it represent a flrm 144.:g@.!e able to suryive over rime?

tlie ber:r: brern ing inrlustry Ta

{ )ntput (millions r if ban-tis)

costs

EconomicsforManagers'ThirdEdition,byPaul G Farnham.PublishedbyprenticeHall.copyright@2014bypearsonEducation,,nc

b.

i-"""

ne lirm is currently cmpioying 100 anrl 100 rrrrils uf labor. '1rc wirgr,

'capital is $10.

,lo'u.ttral afticle on thc battle fbr market sliare in the autonrotrilc industry in 2000: ,,The hngr lixerl

running