Question
Consider an example of a production function that relates the monthly production of widgets to the monthly use of capital and labour services. Suppose the
Consider an example of a production function that relates the monthly production of widgets to the monthly use of capital and labour services. Suppose the production function takes the following specific algebraic form:
Q = K *L - (0.15) *L2
Where Q is the output of widgets, K is the input of capital services, and L is the input of labour services.
a.Suppose that, in the short run, K is constant and equal to 15. Feel in the following table
K
L
Q
15
5
?
15
10
?
15
15
?
15
20
?
15
25
?
15
30
?
15
40
?
15
50
?
B. Using the values from the table, plot the values of Q and L on a scale diagram, with Q on the vertical axis and L on the horizontal axis. (This is analogous to the TP curve).
C. Now suppose that K increases to 25 because the firm increases the size of its widget factory. Re-compute the values of Q for each of the alternative values of L. Plot the values of Q an L on the same diagram as in part (B)
D. Explain why an increase in k increases the level of Q (for any given level of L).
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