Subject: Economics

1. The following table describes the actual production function for oil pipelines. Marginal product Average product Pumping Total product (barrels per day (barrels per day horsepower (barrels per day) per hp) per hp 10,000 86,000 20,000 114,000 30,000 134,000 40,000 150,000 50,000 164,000 a. Fill in the missing values for marginal products and average products. b. Plot the production function of output against horsepower. On a separate graph, plot the curves for average and marginal products. c. What does the principle of diminishing marginal product say about adding variable inputs? 2. Substitution occurs when firms replace one input for another, as when a farmer uses tractors rather than labor when wages rise. Which of the following represents substitution of one factor for another with an unchanged technology, and which represents technological change? Illustrate using the isoquant diagram. a. When the price of oil increases, a firm replaces an oil-fired plant with a gas-fired plant. b. A bookseller reduces its staff by 60 percent after it sets up an Internet outlet. C. A college buys personal computers for its faculty and reduces its secretarial workforce. d. A private security firm decreased its employment of CCTV operators as it introduced Al-operated cameras.3. Consider the following table: Land lnpuls [acres] Labor Inputs ii-i mm 5 D"- H a. Calculate TE. VC. FE; AC. AVIS. and tutti. Plot the All and ME curves. h. Assume that the price of labor doubles. Calculate the new AC and MC. Plot and compare with the previous AC. and ME curves. c. Suppose that wages did not change but instead. total factor productivity doubles [the level of output doubles for each input combination]. Calculate the new All: and ME. Plot and compare with the previous AE and ME curves. cl. Which two major factors affect a rm's cost curves? 4. identify whether the following statements are true or false. Explain your answer using a single sentence. a. Average costs are minimized when marginal costs are at their lowest point. h. Because xed costs never change. average xed cost is constant for each level of output. Average cost is rising whenever marginal cost is rising. d. The opportunityr cost of drilling for oil in a national heritage site is zero because no firm produces anything there. e. A rm minimizes costs when it spends the same amount on each input. i"