ONLINECO 

Chapter 18. Exercises 1-5. The Markets for the Factors of Production. Gregory Mankiw. Principles of Economics. 7th edition.

 

1. Suppose that the president proposes a new law aimed at reducing healthcare costs: All Americans are required to eat one apple daily. b. How would the law affect the marginal product and the value of the marginal product of apple pickers?

 

2. Show the effect of each of the following events on the market for labor in the computer manufacturing industry.

a. Congress buys personal computers for all U.S. college students.

b. More college students major in engineering and computer science.

c. Computer firms build new manufacturing plants.

 

3. Suppose that labor is the only input used by a perfectly competitive firm. The firm’s production function is as follows:

a. Calculate the marginal product for each additional worker.

b. Each unit of output sells for $10. Calculate the value of the marginal product of each worker.

c. Compute the demand schedule showing the Number of workers hired for all wages from zero to $100 a day.

d. Graph the firm’s demand curve.

e. What happens to this demand curve if the price of output rises from $10 to $12 per unit?

​

4. Smiling Cow Dairy can sell all the milk it wants for $4 a gallon, and it can rent all the robots it wants to milk the cows at a capital rental price of $100 a day. It faces the following production schedule:

a. In what kind of market structure does the firm sell its output? How can you tell?

b. In what kind of market structure does the firm rent robots? How can you tell?

c. Calculate the marginal product and the value of the marginal product for each additional robot.

d. How many robots should the firm rent? Explain.

 

5. The nation of Ectenia has twenty competitive apple orchards, which sell apples at the world price of $2 per apple. The following equations describe the production function and the marginal product of labor in each orchard: 𝑞=100𝑙−𝑙^2 𝑚𝑝𝑙=100−2𝑙 where Q is the number of apples produced in a day, L is the number of workers, and MPL is the marginal product of labor.

a. What is each orchard’s labor demand as a function of the daily wage W? What is the market’s labor demand?

b. Ectenia has 200 workers who supply their labor inelastically. Solve for the wage W. How many workers does each orchard hire? How much profit does each orchard owner make?

c. Calculate what happens to the income of workers and orchard owners if the world price of apples doubles to $4 per apple.

d. Now suppose the price is back at $2 per apple, buta hurricane destroys half the orchards. Calculate how the hurricane affects the income of eachworker and of each remaining orchard owner. What happens to the income of Ectenia as a whole?