Economics 3 online essay editor

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1. An industry is characterized by the following production function:

(a)	What is the algebraic expression for the marginal productivity of labor?
(b)	What is the algebraic expression for the average productivity of labor?
(c)	How would you characterize the returns-to-scale in the industry?

 

Q = 3.5L^.65 C^.35

 

 

(d).  Finish the table with the marginal productivity of labor, average productivity of labor and elasticity of production with respect to labor:

 

Crew Size	Total Output	Marginal Product of Labor	Average Product of Labor	Elasticity of production w/rt labor
(No. of Workers)	(No. of Units)
0	0
1	10
2	35
3	50
4	56
5	59
6	60
7	60
8	58

 

 

(e)        During the last few days the Superior Company has been running into problems with its computer system. The last run of the production cost schedule resulted in the incomplete listing shown below. From your knowledge of cost theory, fill in the blanks.

 

Q	TC	TFC	TVC	ATC	AFC	AVC	MC
0	40	_____	_____	x	x	x	x
1	_____	_____	_____	52	_____	_____	_____
2	_____	_____	20	_____	_____	_____	_____
3	_____	_____	_____	21.33	_____	_____	_____
4	_____	_____	_____	_____	_____	_____	4
5	_____	_____	40	_____	_____	_____	_____
6	_____	_____	_____	15.67	_____	_____	_____
7	_____	_____	_____	_____	_____	10	_____
8	_____	_____	96	_____	_____	_____	_____
9	_____	_____	_____	_____	_____	15	_____
10	_____	_____	_____	_____	_____	_____	45

 

 

 

2. For each of the following cost-output relationships, describe:
3. the shape (U-shape, decreasing, increasing, constant) of the average total cost function
4. Describe the marginal cost function (C = total cost, Q = output)
5. For each cost curve, describe an industry that might have a similarly shaped cost curve. Explain your assertion.

 

(a)	C = 42,500,000 + 2550Q
(b)	C = 8.48 + 0.65Q + .00220Q2

 

 

 

 

 

 

 

3. Offshore Petroleum’s fixed costs are $3,500,000 and its debt repayment requirements are $2,000,000. Selling price per barrel of oil is $28 and variable costs per barrel are $20.

 

 

(a)	Determine the breakeven output (in dollars).
(b)	Determine the number of barrels of oil that offshore must produce and sell in order to earn a target (operating) profit of $1,500,000.
(c)	Determine the degree of operating leverage at an output of 600,000 barrels.
(d)	Assuming that sales of oil are normally distributed with a mean of 500,000 barrels and a standard deviation of 100,000 barrels, determine the probability that Offshore will incur an operating loss.

 

(e) There has been much discussion about the rising costs of college.  Use your knowledge of cost theory to explain how college costs have changed.  How does online education figure into this issue, and given the cost structures of colleges and universities, what will the future of higher education look like.  You do not have to estimate cost curves, but you should be able to speculate on the shapes of cost curves and the implications of these shapes.  Be thorough, cite any references used.

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