Consider a firm in a perfectly competitive industry. Market price right now is Pmkt. Demand for the firm's prod- ucts (not Market demand) is perfectly elastic at the market price. (Note: since this is a perfectly competitive industry, this is true in the long-run or short-run and is a consequence of the price-taking assumption) This firm is offered an opportunity to upgrade technology that will make all labor more productive than before (with the same machines). The technology costs a fixed amount F. (a) How does the firm's supply curve change with the technology? (b) Will the firm adopt the technology?

Consider a firm in a perfectly competitive industry. Market price right now is Pmkt. Demand for the firm's prod- ucts (not Market demand) is perfectly elastic at the market price. (Note: since this is a perfectly competitive industry, this is true in the long-run or short-run and is a consequence of the price-taking assumption) This firm is offered an opportunity to upgrade technology that will make all labor more productive than before (with the same machines). The technology costs a fixed amount F. (a) How does the firm's supply curve change with the technology? (b) Will the firm adopt the technology?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter11: Profit Maximization

Section: Chapter Questions

Problem 11.3P

See similar textbooks

Similar questions

Consider a profit-maximizing firm in a perfectly competitive market with several sellers and several buyers (i.e., the firm is a "price taker" of the hourly wages it pays its workers). If a technological innovation made by someone in this firm were to significantly raise the firm's marginal physical product (but not that of any other firm's), then this innovation would: (A) reduce the firm's employment level, because fewer workers are now needed (B) raise the workers' hourly wage as they now contribute more marginal revenue (C) lead the firm to hire more workers but not to raise their wages (D) lead the firm to hire more workers and to pay them higher wages (E) None of the above Only typed answer and don't use chat gpt
Under what condition will a competitive firm necessarily shut down its operations? What does this imply regarding the shape of the firm's short run supply curve? Use this condition to determine the short run supply curve of the firm uses Labour (L) and Capital (K) to produce commodity (Y). Assuming that the wage rate is Rs. 340/- and the rental rate on capital is Rs. 0.5/-. The quantities of the inputs and outputs are shown in the table below. L 0 1 2 3 4 5 6 7 8 9 10 K 90 90 90 90 90 90 90 90 90 90 90 Y 0 100 250 420 560 675 760 820 860 885 900
Consider a firm's short-run and long-run supply curves, pictured below. In the short run, one of the inputs to production is fixed. Suppose you know that, at an output of nine units, the fixed factor of production associated with the short-run marginal cost is at its optimal level. You also know that the long-run marginal cost of producing nine units is $9. Using the drag tool, place both the short-rur and the long-run supply curves into their correct positions within the graph. (Once you have made the necessary move(s), both supply curves should be entirely within the graph.) To refer to the graphing tutorial for this question type, please click here 15 54 13 3 2 1 7 OF 9 QUESTIONS COMPLETED 6554 SUBMIT ANSWE
The following graph plots daily cost curves for a firm operating in the competitive market for air fryers. Using the following table, for each price level, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to determine the firm's total variable cost, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent variable cost information.) shuts down, the firm would suffer losses of $1,600,000 per day until its fixed costs end (such as the expiration of a building lease). This firm's shutdown price - that is, the price below which it is optimal for the firm to shut down - is per fryer: The following graph plots daily cost curves for a firm operating in the competitive market for air fryers. PRICE(Dollars per fryer) 888 100 90 80 70 60 60 30 20 10 0 0 MC 5 10 15 20 25 Price (Dollars per fryer) 25.00 70.00 100.00 ATC 30 36 40 QUANTITY (Thousands of fryers) AVC Quantity (Fryers) 45 50 Using the…
A manager hires labor and rents capital equipment in a very competitive market. Currently the wage rate is $12 per hour and capital is rented at $8 per hour. If the marginal product of labor is 60 units of output per hour and the marginal product of capital is 45 units of output per hour, is the firm using the cost-minimizing combination of labor and capital? If not, should the firm increase or decrease the amount of capital used in its production process?
The following table gives information about a firm’s short-run cost function in a perfectly competitive industry – candy manufacturing. a) What quantity will the firm supply when price of candy is $2? When price is $5? When price is $8? b) Consider the case where price = $2. Suppose that you have been renting capital (a candy-making machine) for a long time under a long-run capital rental agreement, but now the rental contract is about to expire. Should you renew your capital rental contract or not? Explain why or why not. How would your answer change if price is $5? How would your answer change if price is $8? Quantity Total Cost Average Variable Cost Average Total Cost Marginal Cost 0 10 1 15 5 15 5 2 17 3.5 8.5 2 3 18 2.66667 6 1 4 20 2.5 5 2 5 25 3 5 5 6 33 3.83333 5.5 8
A competitive firm produces output using three fixed inputs and one variable input. The firm’s short-run production function is q = 200x − 3x^2, where x is the amount of variable input used. The price of the output is $5 per unit and the price of the variable input is $10 per unit. In the short run, how many units of x should the firm use?
The market for smart thermostats has grown increasingly competitive. Producers of smart thermostats all rely on the same technology and face the same costs. The cost function for a smart thermostat producer is given by the following function: c(y)=-10y+2003 where y stands for the number of smart thermostats produced and sold in a month. 2nd attempt Suppose the market demand for smart thermostats in any month is given by QD = 305 - p. In the long-run equilibrium, we would expect to find firms in the industry. See Hint
Suppose q = f(L,K) =2L¹/2 What is the marginal cost in the long-run of the firm? O MCLR(q) = q4/2 MCLR(q) = q2 / 4 O MCLR(q) = q /4 O MCLR(q) = 8q³/3 O MCLR(q) = 4q²/2 + 2K1/2 and the prices or labor and capital are w=$1, r=$1.
Each firm in a perfectly competitive industry has the following production function: q = K1/4L1/4 Each firm takes factor prices as given. Factor prices are r = 4, w = 16 Suppose firms in this industry face a recurring fixed cost FC=144, ie, firms face a fixed cost FC=144 in the long run. Rewrite long run MC(q) and AC(q) functions and then find the long run equilibrium price.
A firm's technology is characterized by a Cobb - Douglas production function of the form 1 1 y = f(K,L) = 2K² + 1² a. The output price is p, and the input prices are r and w for K and L, respectively. Set up the problem for a profit - maximizing firm and solve for the factor demand functions for K and L. b. Find the firm's supply function. c. Find the firm's profit function. d. Assume now that p = 2, r = 1, and w = 1. Using the functions you have found in parts (a), (b) and (c), calculate the profit - maximizing levels of the factors and (K* and L*), the profit - maximizing output level (v) and the maximum profit of the firm (). Please solve it by explaining and explaining.
A competitive firm uses two variable factors to produce its output, with a production function q = min{x1, x2}. The price of factor 1 is £8 and the price of factor 2 is £5. Due to a lack of warehouse space, the company cannot use more than 10 units of x1. The firm must pay a fixed cost of £80 if it produces any positive amount but doesn't have to pay this cost if it produces no output. What is the smallest integer price that would make a firm willing to produce a positive amount? А. £44 В. £41 С. £29 D. £13 Е. £21