1. Optimal choice of capital Megan makes sweaters in her home. Starting with just some knitting needles 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 worthwhile 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 Megan's sweater business is a perfectly competitive firm. Complete the following table by calculating the marginal physical product (MPP) of each loom and the marginal revenue product (MRP) of each loom. Quantity of Input MPP of Each Loom MRP of Each Loom (Looms) Output (Sweaters per year) (Sweaters) (Dollars) 0 50 1 90 40 800 2 120 30 600 3 142 22 440 4 159 17 340 5 174 15 300 If the rental price of a loom is $320 per year, Megan 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? The supply of tobacco would be less elastic than the supply of looms. The demand for tobacco would be more elastic than the demand for looms. O The demand for tobacco would be less elastic than the demand for looms. The supply of tobacco would be more elastic than the supply of looms.
1. Optimal choice of capital Megan makes sweaters in her home. Starting with just some knitting needles 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 worthwhile 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 Megan's sweater business is a perfectly competitive firm. Complete the following table by calculating the marginal physical product (MPP) of each loom and the marginal revenue product (MRP) of each loom. Quantity of Input MPP of Each Loom MRP of Each Loom (Looms) Output (Sweaters per year) (Sweaters) (Dollars) 0 50 1 90 40 800 2 120 30 600 3 142 22 440 4 159 17 340 5 174 15 300 If the rental price of a loom is $320 per year, Megan 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? The supply of tobacco would be less elastic than the supply of looms. The demand for tobacco would be more elastic than the demand for looms. O The demand for tobacco would be less elastic than the demand for looms. The supply of tobacco would be more elastic than the supply of looms.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Question
please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education