Evren Wants to Go into the Donut Business

question 114

Essay

Evren wants to go into the donut business.For $500 per month he can rent a bakery complete with all the equipment he needs to make a dozen different kinds of donuts (K = l,r = 500).He must pay unionized donut bakers a monthly salary of $400 each.He projects his monthly production function to be
Q = 5KL
where Q is tons of donuts.
a.With the current level of capital,what is the marginal product of labor? Is the marginal product diminishing? Explain.
b.If Evren wishes to make 25 tons of donuts,how many bakers are required given the current level of capital? How much will it cost to produce this (total cost)?
c.Derive Evren's short-run cost function with K=1.
d.Derive the marginal cost curve from your answer to c.and show the relationship between the marginal cost and marginal product of labor.

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Definitions:

Active Listening

Fully concentrating on what is being said rather than passively hearing the message of the speaker, involving feedback and engagement.

Free Association

A psychoanalytic process in which the patient says whatever comes to mind without censorship as a way to explore the unconscious.

Cognitive Therapy

A psychological treatment approach that seeks to address maladaptive thinking patterns to alleviate psychological distress and promote adaptive behavior and cognition.

Behavior Can Be Conditioned

The concept that actions can be influenced or learned through associations with outcomes or stimuli, as seen in classical and operant conditioning.