Chapter 8(Production and Cost in the Short Run)Duplicate Technical Problems with Answers
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Chapter 8Dup
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Southern New Hampshire University
Chapter 8
Production and Cost in the Short Run
Duplicate Technical Problems
1. “When a manager fails to employ an economically efficient input combination, then the firm cannot be producing in a technically efficient manner.” Evaluate this statement.
2. A firm plans to produce 500 units...
chapter 8production and cost in the short runduplicate technical problems with answers
production and cost in the short runduplicate technical problems with answers
duplicate technical problems wi
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12e TP CH08 - Duplicate Technical Problems with
Answers
Economy (Prince Sultan University)
, lOMoARcPSD|3013804
Chapter 8
Production and Cost in the Short Run
Duplicate Technical Problems
1. “When a manager fails to employ an economically efficient input combination, then the firm
cannot be producing in a technically efficient manner.” Evaluate this statement.
2. A firm plans to produce 500 units per day of good Z. The firm’s production engineer finds two
technically efficient processes (i.e., input combinations of labor and capital) to produce 500 units
per day:
Process Alpha Process Beta
Labor 625 250
Capital 45 125
a.
If the production function for the existing technology is Q f ( L, K ) , where Q is the
maximum possible output, L is the amount of labor used, and K is the amount of capital used,
then f (625, 45) = and f (250, 125) = .
b.
If the firm must pay $350 per day for a unit of labor and $1,500 per day for a unit of capital,
which process is economically efficient, Alpha or Beta?
c.
If the price of labor falls to $300 per day for a unit of labor and the price of capital remains
$1,500 per day, which process is now economically efficient, Alpha or Beta?
d.
Holding the price of capital constant at $1,500 per unit, Process Alpha will never be
economically efficient if a unit of labor costs (less, more) than $ per day
e.
“The process that turns out to be economically efficient will depend on the prices the firm must
pay for labor and capital inputs.” Evaluate this statement.
3. Water Works Plumbing Company is a small owner-managed plumbing services company that
serves the greater Miami metropolitan area. Identify each of the following costs as either a variable,
a fixed, or a quasi-fixed cost:
a.
Gasoline expense for the service van.
b.
Cost of a complete set of tools needed to be a plumber.
c.
Labor expense for an assistant plumber who is hired on an hourly basis and works with the
owner-manager of the firm when the owner needs a helper.
d.
Monthly lease payment for a drain-line auger, which contractually binds WW Plumbing to pay
$75 per month for the next 12 months, regardless of how much or how little the company uses
the leased piece of plumbing equipment. Subleasing is prohibited and there will be no refund if
the machine is returned before the 12 month period expires.
e.
Cost of the owner’s time to run the plumbing business.
f.
Expense for plumbing service consumables: plumbers’ putty, Teflon tape, pipe lubricant,
sandpaper, PVC glue, butane for torch, etc.
Chapter 8
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