1.Given the Production Function of a perfectly competitive firm: Q = 30L + 12L² - 0.5L³, where Q =Output and L = labor input

a.At what value of L will Diminishing Returns take effect?

b.Calculate the range of values for labor over which stages I, II, and III occur?

c.Suppose that the wage rate is $30 and the price of output is $2 per unit.How many workers shouldthe firm hire?

d.At what value of L will Q be at its maximum?What is the maximum amount of Q?

e.If demand forecasts predict an output level of between 900 and 1100 in the next decade, whatwould be your long-run strategy to optimize the resources of your company?

1.Suppose that you estimate the following cost function for your company, which is a monopolistically competitive firm:

TC 80Q -4Q ² + 0.25Q³ ,

and the following demand curve for your product:

P=80 -2Q

a.Compute and plot the average cost and marginal cost.

b.Over what range of output does economies of scale exist? Diseconomies of scale?

c.How many units of output will you produce and what price will you charge for each unit?(Hint: A monopolistically competitive firm produces where MR=MC. First find the level of output by setting MR=MC, then substitute the value of Q into the price equation above to find the value of

P.)

d.Is the company making a profit or loss at the suggested output level?How much?