Microeconomics

Directions:  Click on the "file" item at the top left of the browser window.  Click on "Save as..." from the pull down menu.   Do the necessary reading then answer the questions in the file you just saved.   When you are all done then send me your answers as email.  The best thing to do is to include the file with the questions and your embedded answers as an attachment.

NAME:___________________________

I. INPUT SUBSTITUTION

a. Are you aware of different input combinations your firm could use to produce its product? Give some details.

b. Do dishwashers, washers and dryers, food processors, etc. really help us get the same work done in less time?

c. What is the product at Temple University? Is marginal physical product a meaningful concept? Are the marginal returns to additional units of labor increasing, decreasing, constant?

d. Does your firm hire additional labor to the point where the added revenue resulting from selling the output of an additional worker equals the price of labor? Could you determine this kind of behavior from the usual accounting data reported by the firm?

e. What government policy is likely to have the reverse effect of rate of return regulation, i.e., induce the firm to hire too much labor?

f. Does the firm consider your services a long run or a short run input? What about the company president's services?

g. What items purchased by your firm are variable only in the long run? If you consider your household a firm, which inputs are variable only in the long run?

h. Is your household characterized by decreasing, constant or increasing returns to scale?

i. When insuring your house do you buy coverage for its historical or replacement value?

II. PRICE AND OUTPUT

a. Does your firm consciously maximize profits? What does your firm do to instill the profit maximizing motive in its employees?

b. Does your firm price where marginal cost equals marginal revenue? Is it possible to determine this point from the usual accounting data?

c. Does your firm distinguish between classes of customers in the price it charges for a particular product? Who does make this distinction? Why? Who should be considered the marginal customer?