Economics and Statistics

You are given the following table of production, fill in the blank. Then graph the total product, average product and marginal product curves with respect to labor. Labor (L)  Capital (k)  Output (Q)  Average Product (Q/L)   Marginal Product 4 3 51 ... n.a 5 3 ... 12.4 ... 6 3 ... ... 7 7 3 ... ... 2 8 3 ... 8.75 ... The solution is: Labor (L)  Capital (k)  Output (Q)  Average Product (Q/L)   Marginal Product 4 3 51 (51/4) n.a 5 3 62 (62/5) 11 6 3 69 (69/6) 7 7 3 71 (71/7) 2 8 3 70 (70/8) -1 If you know the average output and the number of workers (labor) then you know the output at each level (recall the formula for AP). If you know the marginal pro...

We have so far introduced the concept of demand, supply, and consumer choice theory. It is time to pay attention to the agents that compose the supply curve. Firm: a firm is composed of one or more individual that work in order to produce goods or services. A firm's revenue is the total amount of money collected from selling its products. Profit is equal to the revenue minus the cost associated to produce the goods or services. Firms decide the quantity of goods they will produce based on their available factors of production: land, labor, R&D, and capital. These factors of production form a firm's production function, which is used to determine the quantity to produce. The production function is the amount of output (total product) a firm can produce given its inputs. It is often assumed that the level of capital (machines) and technology is fixed in the short run. Therefore, in this period the only variable amount of input is labor. As a general rule, by i...

You are given a table containing the quantities, price, and marginal utilities of two goods, fudge and coffee, which consumer A purchases. Table:  Fudge  Coffee Quantity of purchase 11 pounds 6 pounds Price per pound $3 $3 Marginal utility of last pound 13 24 If consumer A spends all of their income on these two goods, what should consumer A do in order to maximize their utility? (hint: remember the utility maximizing rule) since we know that the utility is maximized when: Let's use the information from the table above,  we can clearly see that the marginal utility for coffee is greater than that of fudge. Utility is subjected to the law of diminishing marginal utility ; marginal utility (MU) diminishes as consumers buy more. Thus, in order to maximize their utility, consumer A needs to buy more coffee and less fudge up until the ratio of the MU of coffee over its price is equal to the ratio ...

Utility: The benefit consumers obtain from consuming a good or service. In basic economic models, we assume that consumers are utility maximizing agents. Utility maximization : consumers try to obtain the most satisfaction (or utility) as possible. When a person consumes one extra unit of a good or service, they experience marginal utility. When the marginal utility is equal to zero, the utility from a particular good has been maximized. The consumer increases their utility by increasing their consumption from Q1 to Q2. However, after Q2, if the consumer were to consume one more unit, they would experience negative marginal utility, decreasing their total amount of utility. Therefore, utility is maximized at Q2. When a consumer pays for a good or service at the market clearing price, they will consume up until their marginal utility equals the price of their purchase. Since there are multiple different goods and services in an economy, how...