Suppose you own a home remodeling company. You are currently earning short-run profits. The home remodeling industry is an increasing-cost industry. In the long run, what do you expect will happen to
- Your firm’s costs of production? Explain
- The price you can charge for your remodeling services? Why?
- Profits in home remodeling? Why?
Chapter 9 Problem 4
The MorTex Company assembles garments by hand even though a textile machine exists that can assemble garments faster than a human can. Workers cost $50 per day, and each additional laborer can produce 200 more units per day (i.e., marginal product is constant and equal to 200). Installation of the first textile machine on the assembly line will increase output by 1,800 units daily. Currently the firm assembles 5,400 units per day.
Chapter 9 Problem 2
The Largo Publishing House uses 400 printers and 200 printing presses to produce books. A printer’s wage rate is $20, and the price of a printing press is $5,000. The last printer added 20 books to total output, while the last press added 1,000 books to total output. Is the publishing house making the optimal input choice? Why or why not? If not, how should the manger of Largo Publishing House adjust input usage?