(9N9.2) Would a lump-sum profits tax affect the profit-maximizing quantity of output? How about a proportional tax on profits? How about a tax assessed on each unit of output? How about a tax on labor input?
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- (9N9.2) Would a lump-sum profits tax affect the profit-maximizing quantity of output? How about a proportional tax on profits? How about a tax assessed on each unit of output? How about a tax on labor input?
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- 10. Extension of the Cobb-Douglas Production Function-The Cobb-Douglas produc- tion function (Equation 7.16) can be shown to be a special case of a larger class of linear homogeneous production functions having the following mathematical form:" Q = y[@K* + (1 – a)L°]W/P where y is an efficiency parameter that shows the output resulting from given quantities of inputs; a is a distribution parameter (0 sas 1) that indicates the division of factor income between capital and labor; p is a substitution parameter that is a measure of substitutability of capital for labor (or vice versa) in the pro- duction process; and v is a scale parameter (v > 0) that indicates the type of re- turns to scale (increasing, constant, or decreasing). Show that when v = 1, this function exhibits constant returns to scale. [Hint: Increase capital K and labor L each by a factor of A, or K* = (A)K and L* = (1)L, and show that output Q also increases by a factor of A, or Q* = (A)(Q).]Which of the following is an implicit cost of production? 16: A) the utility bill paid to water, electricity, and natural gas companies B) the loss in the value of capital equipment due to wear and tear C) the salary you pay yourself for running your business D) the interest you pay your mother for the money she loaned you to start your business"Diminishing Returns in Microbrewing? Your microbrewery produces craft beer, using a single vat, various ingredients, and workers. If you double the number of workers and ingredients, but don’t add a second vat, would you expect your output (gallons per hour) to double? Explain.If you double the number of workers and ingredients and add a second vat, would you expect your output (gallons per hour) to double? Explain."
- “My friend, Mike, is a CPA and owns his own tax business. During tax season, he hires additional workers. Would you expect Mike’s office to experience diminishing marginal product of labor? Would you expect diminishing marginal product of capital? Why or why not?”In a certain country, output is produced using only labor and land. The production function is Y=AXªL1-a where Y is output, X is the quantity of land, and Lis the quantity of labor. Factors of production are paid their marginal products. In this country there are 100 acres of land and 30 workers. Land earns a rent of $4,000 per acre per year. Workers are paid a wage of $10 per hour, and work 2,000 hours per year. What is the value of a?1. If the estimated Cobb-Douglas production function is Q = 10K0408 a. What are the output elasticities of capital and labor? If the firm increases only the quantity of capital or only the quantity of labor used by 10%, by how much would output increase? ( b. What type of returns to scale does this production function indicate? If the firm increases at the same time both the quantity of labor and the quantity of capital used by 10%, by how much would output increase? (
- In the island nation of Autarka, cardboard boxes are manufactured by four rms: Andrew'sIndustries, Brett's Boxes, Carla's Cardboard, and Delia's Durables. In Autarka, cardboard boxes are sold in bundles of 100. At present, the market price for a bundle of boxes is $30. The technology for manufacturing cardboard boxes is readily available and common to all manufacturers. The cost of plant and machinery for a rm in the box manufacturing business is $7,000,000 per year. The labour, material, and energy cost of producing abundle of 100 boxes is $20. A market study indicates that demand for cardboard boxes is given by the function,P= 40 - Q/500,000 ;where P represents the price of a bundle of 100 boxes, and Qis the total number of bundles of boxes sold each year. Assuming that firms are engaged in Cournot Competition, Using the information provided in the scenario, derive a total cost function for a typical cardboard box manufacturer. Use QA to denote the quantity produced by thetypical…In the island nation of Autarka, cardboard boxes are manufactured by four rms: Andrew'sIndustries, Brett's Boxes, Carla's Cardboard, and Delia's Durables. In Autarka, cardboard boxes are sold in bundles of 100. At present, the market price for a bundle of boxes is $30. The technology for manufacturing cardboard boxes is readily available and common to all manufacturers. The cost of plant and machinery for a rm in the box manufacturing business is $7,000,000 per year. The labour, material, and energy cost of producing abundle of 100 boxes is $20. A market study indicates that demand for cardboard boxes is given by the function,P= 40 - Q/500,000 ;where P represents the price of a bundle of 100 boxes, and Qis the total number of bundles of boxes sold each year. Using the information provided in the scenario, derive a total cost function fora typical cardboard box manufacturer. Use QA to denote the quantity produced by thetypical firm.A breeder tells you he has determined for each 1-lb increase in weaning weight profit increases by $1.40 per pound. However, he has also calculated that for each independent 1-lb increase in birth weight, profit decreases $5.45 per pound. 1. What would be the economic index for this aggregate breeding value? 2. If the producer gave you the following table with calf birth weight and weaning weight, what would be the index value and rank for these animals? Calf id Weaning weight Birth weight Index value Rank 608 78 589 70 566 80 532 75 5. 556 76 618 87 7. 576 74 8. 610 88 9. 595 90 10 625 73 3 4 6
- 11. Suppose that the production function is Y=K^(0.5) N^(0.5). With this production function the marginal product of labor is MPN=0.5K^(0.5) N^(-0.5). The capital stock is K=100. The labor supply curve is NS=100(w^2), where w is the real wage and NS denotes the quantity of labor supplied. Compute the equilibrium level of employment (N). 12. Consider Question 11 again. Compute the level of full-employment output (Y). Approximate your answer to the next integer. 13. Consider Question # 11 again. Due to a temporary reduction in immigration, the economy's labor supply curve changes to NS=90(w^2). A policy maker suggests that in order to increase full-employment output in response to the reduction in immigration the government might temporarily subsidize the firm's labor cost by paying a fractions of the wage it pays to a worker. That is, if the real wage received by a worker is w, the firm only pays a portion (1-s)w with the remaining sw coming from the government. Compute the subsidy s…Discussion: What are the implications when a firm is out of the equi-marginal point? Focus your response on input productivity and input prices. For instance, when is productivity of one input relative to its price is not equal to productivity of another input relative to its price? Provide an example of the equi-marginal principle at work in the real world.How to economists conceptualise Human Capital? Why are these differences important both empirically and theoretically? (500w)