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Production Function
Exogenous Variable
An exogenous variable in an economic model is one whose value is determined outside the model. Its value is set by the modeler and is taken as a given, rather than being explained by the model's internal mechanics. In short-run analysis, variables that are difficult to adjust, such as capital stock, are often treated as exogenous.
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.7 The firm and its customers - The Economy 2.0 Microeconomics @ CORE Econ
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Short-Run vs. Long-Run Analytical Framework
The Production of Quinoa (Figure 8.13a)
A company's production function describes the maximum output achievable with a given quantity of inputs, using a specific technology. A furniture workshop's production function indicates that with 5 carpenters, the maximum output is 10 chairs per day. Given this information, which of the following scenarios represents a technologically inefficient production outcome for this workshop?
Analyzing a Pottery Studio's Production
A small bakery has a single large oven with a fixed capacity. When one baker is working, they can produce 50 loaves of bread per day. When a second baker is hired, the total output increases to 90 loaves per day. Assuming both bakers are equally skilled, which statement best analyzes this production scenario?
A farm's production process for wheat is represented by a curve that plots the number of workers on the horizontal axis and the total wheat output on the vertical axis. The curve starts at the origin, rises, and becomes progressively flatter as more workers are added. What does the flattening shape of this curve imply about the contribution of each additional worker, assuming all other inputs like land and machinery are held constant?
A technological innovation that improves a firm's production process will cause its production function to shift downwards, because the firm can now produce the same amount of output using fewer inputs.
Comparing Production Technologies
Applying a Production Function
A bicycle assembly plant uses a specific technology where the relationship between the number of workers (L) and the maximum number of bicycles produced per day (Q) is described by the function: Q = 20 * √L. If the plant currently employs 4 workers, what would be the maximum expected output if the number of workers is increased to 16?
Evaluating Production Differences
A firm uses a specific process to convert resources into goods. Match each term related to this process with its correct description.
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Short Run in Economics
An economist is building a model to predict the daily output of a specific farm during a single growing season. The model's inputs are the number of workers hired per day and the total acreage of land available for planting. The farm manager can adjust the number of workers daily, but the amount of land owned by the farm is fixed for that season. Within the context of this model for daily output, which element is best described as an exogenous variable?
Analyzing Model Variables
Coffee Shop Profit Model Analysis
When constructing a short-term economic model of a single company's production output, treating the number of factories the company owns as an exogenous variable is an appropriate choice because this factor is determined by forces outside the model's immediate scope and is not expected to change within the short-term timeframe being analyzed.
An economist is creating a model to explain and predict the equilibrium price of gasoline in a single country for the upcoming quarter. For this specific model, match each component to its most likely role.
Evaluating Model Assumptions
When constructing an economic model to analyze the production output of a single factory, a variable whose value is determined by forces outside the model (such as a new government environmental regulation) is treated as a given. This type of input is known as a(n) ________ variable.
A researcher is building a short-run economic model to explain the weekly sales volume of a specific brand of smartphone. The modeler decides to treat the global price of silicon chips (a key component in manufacturing the phone) as an exogenous variable. Which statement provides the best analysis of this decision?
An economist is building a model to predict the average monthly rent for apartments in a city over the next year. A key factor is the supply of new apartments. A new municipal regulation is passed that strictly limits the number of new housing units that can be built. If the economist designs the model to predict the number of new housing units as an outcome that can change in response to rent prices, instead of treating the new regulation as a fixed external constraint, what is the most likely consequence?
Evaluating Model Design Choices