Question

GIVEN THE PRODUCTION OF FUNCTION Q=20L-8-0.5L

Answer 1

Answer:

1) Consider the following output table:

Labor Output Marginal

Product

Average

Product

Elasticity of

Production

1 2 2 2 1

2 6 4 3 1.3

3 16 10 5.3 1.9

4 29 13 7.3 1.8

5 43 14 8.6 1.7

6 55 12 9.2 1.3

7 58 3 8.3 .36

8 60 2 7.5 .27

9 59 -1 6.6 -.15

10 56 -3 5.6 -.53

a) Calculate Marginal product, Average Product, Elasticity of Production.

See above chart

b) Within what ranges do we see increasing returns, decreasing returns and negative

returns?

Increasing returns: 1-5

Decreasing returns: 6-8

Negative returns: 9-10

2) Consider the following short run production function:

2 3 Q  6L .4L

a) Find the value of L that maximizes output.

First, find marginal product:

2 MP 12L 1.2L

Now, set marginal product equal to zero and solve for L:

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