1. Suppose the production function for automobiles is given by q = kl-0.8k² -0.21² where q represents the annual quantity of bicycles produced, k represents annual capital input, and I represents annual labor input. a) Suppose k=10; graph the total and average productivity of labor curves. At what level of labor input does this average productivity reach a maximum? How many cars are produced at that point? b) Again, assuming k=10, graph the MP curve. At what level of labor input does MP = 0 c) Suppose capital inputs were increased to k-20. How would your answer to parts (a) and (b) change?
1. Suppose the production function for automobiles is given by q = kl-0.8k² -0.21² where q represents the annual quantity of bicycles produced, k represents annual capital input, and I represents annual labor input. a) Suppose k=10; graph the total and average productivity of labor curves. At what level of labor input does this average productivity reach a maximum? How many cars are produced at that point? b) Again, assuming k=10, graph the MP curve. At what level of labor input does MP = 0 c) Suppose capital inputs were increased to k-20. How would your answer to parts (a) and (b) change?
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.2P
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