Bhen and Geri run an ice cream business in the town of Palouse, WA. To produce the ice cream, they hire labor L at a wage of W dollars per worker. L…

Bhen and Geri run an ice cream business in the town of Palouse, WA. To produce the ice cream, they hire labor L at a wage of W dollars per worker. L is the only input in production. L workers produce Y pints of ice cream according to the production function, Y = F(L) = 10L − ( 1 2 )L 2 . They then sell the ice cream at the price of P dollars per pint of ice cream. 1. Plot the production function in a graph (with L on the X-axis and Y on the Y-axis) for values of labor L = 0, …, 10. 2. Write the firm’s profit function in terms of labor, Π(L). Then plot the firm’s profits for values of labor L = 0, …, 10 for price P = 2 and wage W = 4. From your graph, at what value of L do profits appear to be maximized? 3. The MPL function (∆Y/∆L) for the production function given above is: MPL(L) = 10 − L. Plot the MPL function for values of labor L = 0, …, 10. How does the MPL change with the level of L employed? In this example, are there diminishing returns to labor? 4. State the condition on labor demand for which profits are maximized. 5. For the wage W = 4 and price P = 2, what is the profit maximizing level of labor demand, L ∗ ? 6. Given the same price and wage as in Part 5, how many pints of ice cream do Bhen and Geri produce under profit maximization (Y ∗ )? What are their profits? 7. Now suppose Ferdinand’s starts selling ice cream in Palouse, which drives down the price that Bhen and Geri can get for a pint of their ice cream to P = 1. What is the new profit maximizing level of labor demand (L ∗ )? Now how many pints are produced (Y ∗ )? Now what are profits? 8. Is Bhen and Geri’s supply curve upward sloping between P = 1 and P = 2 (remember that a supply curve is the relationship between price P and optimal output Y ∗ )?

Show more







Calculate Your Essay Price
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Order your essay today and save 10% with the coupon code: best10