..1 T-Mobile 6:29 PM courses.aplia.com Economics 101 18/28/2017-12/22/2017 Facto
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..1 T-Mobile 6:29 PM courses.aplia.com Economics 101 18/28/2017-12/22/2017 Factor Markets: With Emphasis on the Labor Market . Optimal chakce of Kate makes sweaters in her home. Starting with just some knitting needies and yarn, she was able to knit 50 sweaters per year. Now some local stores have expressed interest in her designs and offered to buy her sweaters for $20 each. This makes it worthwhille for her to invest in some capital; in particular, she could produce many more sweaters if she invested in one or more looms, as shown in the following table. Assume that Kate's sweater business is a perfectly competitive firm Complete the following table by calculating the marginal physical product (MPP) of each oom and the marginal revenue product (MRP) of each loon, If the rental price of a loom is $540 per year, Kate should use Suppose the demand for sweaters is very elastic, while the demand for cigarettes is very inelastic. Suppose that looms are used exclusively in the production of sweaters and that tobacco is used exclusively in the production of cigarettes. Which of the following might we expect? O The supply of tobacco would be more elastic than the supply of looms The supply of tobacco would be less elastic than the supply of looms. The demand for tobacco would be less elastic than the demand for looms O The demand for tobacco would be more elastic than the demand for loomsExplanation / Answer
If the rental price of a loom is $540 per year, Kate should use 2 looms .
Explanation:
Kate should increase the use of quantity of looms as long as the MRP of the last loom employed is equal to or greater than the rental price of a loom.
Since at the employment of 2 looms, MRP is $620 and rental price of a loom is $540, therefore, Kate should use 2 looms.
Ans: The demand for tobacco wuld be less elastic than the demand for looms.
Quantity of inputs(Looms) Output MPP MRP($) = $20*MPP 0 50 1 90 40 800 2 121 31 620 3 144 23 460 4 161 17 340 5 176 15 300Related Questions
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