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Chapter 7: FAQs (page 237)

What are some examples of the factors of production?

Short Answer

Expert verified

Examples of factors of production are

  • land,
  • labor,
  • capital,
  • and technology.

Step by step solution

01

Factors of Production

The resources that a company uses to produce its goods and services are also known as the factors of production. The scale of all factors of production, all represent costs incurred by a company, these can include land, labour, capital, and technology.

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Most popular questions from this chapter

The cost of flying a passenger plane from point A to point B is $50,000. The airline flies this route four times per day at 7 am, 10 am, 1 pm, and 4 pm. The first and last flights are filled to capacity with 240 people. The second and third flights are only half full. Find the average cost per passenger for each flight. Suppose the airline hires you as a marketing consultant and wants to know which type of customer it should try to attract—the off-peak customer (the middle two flights) or the rush-hour customer (the first and last flights). What advice would you offer?

Suppose the economy takes a downturn, and that labor costs fall by 50 percent and are expected to stay at that level for a long time. Show graphically how this change in the relative price of labor and capital affects the firm’s expansion path.

In the average cost curve, there is a point where production reaches a minimum. What is that minimum called?

What is the long-run in the microeconomic theory?

You manage a plant that mass-produces engines by teams of workers using assembly machines. The technology is summarized by the production function q = 5KL where q is the number of engines per week, K is the number of assembly machines, and L is the number of labor teams. Each assembly machine rents for r = \(10,000 per week, and each team costs w = \)5000 per week. Engine costs are given by the cost of labor teams and machines, plus $2000 per engine for raw materials. Your plant has a fixed installation of 5 assembly machines as part of its design.

  1. What is the cost function for your plant—namely, how much would it cost to produce q engines? What are average and marginal costs for producing q engines? How do average costs vary with output?

  2. How many teams are required to produce 250 engines? What is the average cost per engine?

  3. You are asked to make recommendations for the design of a new production facility. What capital/ labor (K/L) ratio should the new plant accommodate if it wants to minimize the total cost of producing at any level of output q?
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