Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

6. The production engineers at Impact Industries have derived the expansion path shown in the following gure. The price of labor is $30 per unit.

image text in transcribed
6. The production engineers at Impact Industries have derived the expansion path shown in the following gure. The price of labor is $30 per unit. 600 400 Expansion path '* (short run) 300 Capital (K) Expansion path (long run) . \\ 150 500 600 900 Labor (L) 200 a. What price does Impact Industries pay for capital? b. If the manager at Impact decides to produce 1,200 units of output, how much labor and capital should be used to minimize total cost? Explain. c. What is the average total cost of producing 1,200 and 1,400 units of output in the long run? d. Impact Industries originally built the plant (i.e., purchased the amount of capital) designed to produce 1,200 units optimally. In the short run with capitaf xed, if the manager decides to expand production to 1,400 units, what is the amount of labor and capital that will be used? (Hint: How must the rm expand output in the short run when capital is xed?) e. Given your answer to part at, calculate average variable cost, average xed cost, and average total cost in the short run of producing 1,400 units of output. f. The manager plans to continue producing 1,400 units in the long run. How would you advice the manager

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Political Economy

Authors: Thomas Oatley

6th Edition

1138490741, 9781138490741

More Books

Students also viewed these Economics questions

Question

Explain all drawbacks of the application procedure.

Answered: 1 week ago