A firm's production function is given by y(K, L) = 2√(KL) or 2(KL).5 (2 times the square root of the product of K and L), where K is the number of machines used and L is the number of labor hours. A) Does this production process exhibit increasing, constant or decreasing returns to scale? (Hint: You MUST compare y(2K, 2L) to 2*y(K, L)... do NOT compare any other proportional increase!). B) Holding the number of machines constant at 4, is the marginal product of labor increasing, constant or decreasing as more labor is used? (Hint: You MUST construct a table of L, TP, and MP for 0 through 4 workers).
A firm's production function is given by y(K, L) = 2√(KL) or 2(KL).5 (2 times the square root of the product of K and L), where K is the number of machines used and L is the number of labor hours. A) Does this production process exhibit increasing, constant or decreasing returns to scale? (Hint: You MUST compare y(2K, 2L) to 2*y(K, L)... do NOT compare any other proportional increase!). B) Holding the number of machines constant at 4, is the marginal product of labor increasing, constant or decreasing as more labor is used? (Hint: You MUST construct a table of L, TP, and MP for 0 through 4 workers).
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter7: Production Economics
Section: Chapter Questions
Problem 7E
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A firm's production function is given by y(K, L) = 2√(KL) or 2(KL).5 (2 times the square root of the product of K and L), where K is the number of machines used and L is the number of labor hours.
A) Does this production process exhibit increasing, constant or decreasing returns to scale? (Hint: You MUST compare y(2K, 2L) to 2*y(K, L)... do NOT compare any other proportional increase!).
B) Holding the number of machines constant at 4, is the marginal product of labor increasing, constant or decreasing as more labor is used? (Hint: You MUST construct a table of L, TP, and MP for 0 through 4 workers).
Insert work for both A and B.
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