Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Consider q is output level, K is capital input and L is labour input. In the short run, capital input is fixed at Ko.
Consider q is output level, K is capital input and L is labour input. In the short run, capital input is fixed at Ko. Labour input varies from 0 to 5. Production function is given by q = K L. (a) Suppose a = = 0.5. Calculate the short-run outputs when labour input is 0, 1, 2, 3, 4, and 5 respectively. Calculate the total product and then use the total product values to calculate the marginal product and average product. Indicate whether or not marginal product is diminishing. (b) Suppose a = B = 0.5. Does this production function exhibit constant, increasing or decreasing returns to scale? Using the definition of returns to scale to explain. (c) Suppose a = 1. Does this production function exhibit constant, increasing or decreasing returns to scale? Using the definition of returns to scale to explain. (d) Initially, L = K = 1. If the production function exhibits constant returns to scale, and a = 0.2, what is the value of ? =
Step by Step Solution
★★★★★
3.43 Rating (156 Votes )
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started