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MT445 Unit-4
1. Identify whether each of the following is an explicit cost or an implicit cost:
a) Payments for rented manufacturing equipment
b) A firm’s use of a warehouse that it owns and could rent to another firm
c) Wages paid to the firm’s workers
d) The wages the firm’s owner could earn if he worked for another company
2. Consider the following information in the table for Pat’s Pizza Restaurant and answer the questions below.
Marginal Product of Capital 4,000
Marginal Produce of Labor 100
Wage Rate $10
Rental Price of Pizza Ovens $500
a. Is the owner of Pat’s Pizza Restaurant minimizing cost?
b. Should he rent more ovens and hire fewer workers or rent fewer ovens and hire more workers? Explain.
3. Consider a firm’s production decision in both the short-run and long-run. Explain what type of input costs might be fixed in the short-run and which might be variable in the long-run. Provide one example of each.
Answer will be sent by email as attachment.
a) Payments for rented manufacturing equipment
b) A firm’s use of a warehouse that it owns and could rent to another firm
c) Wages paid to the firm’s workers
d) The wages the firm’s owner could earn if he worked for another company
2. Consider the following information in the table for Pat’s Pizza Restaurant and answer the questions below.
Marginal Product of Capital 4,000
Marginal Produce of Labor 100
Wage Rate $10
Rental Price of Pizza Ovens $500
a. Is the owner of Pat’s Pizza Restaurant minimizing cost?
b. Should he rent more ovens and hire fewer workers or rent fewer ovens and hire more workers? Explain.
3. Consider a firm’s production decision in both the short-run and long-run. Explain what type of input costs might be fixed in the short-run and which might be variable in the long-run. Provide one example of each.
Answer will be sent by email as attachment.
