Consider the production of some output Q using capital K and labour L. a) Assume K is fixed. Draw a short-run total product curve with diminishing returns to labour. Assume that nothing is produced without any labour and an amount of Q = 10 is produced if L %3D = 10. b) Assume the production function has diminishing returns to capital but constant returns to labour. Write down a production function which has these properties. c) Assume the production function is Q = KO5L05. The current amount of capital used for production is 100 and the current amount of labour is 36. The price of a unit of capital is 4, the price of a unit of labour is 12. If you are the producer, would you rather add a bit more labour or a bit more capital to your production?

Consider the production of some output Q using capital K and labour L. a) Assume K is fixed. Draw a short-run total product curve with diminishing returns to labour. Assume that nothing is produced without any labour and an amount of Q = 10 is produced if L %3D = 10. b) Assume the production function has diminishing returns to capital but constant returns to labour. Write down a production function which has these properties. c) Assume the production function is Q = KO5L05. The current amount of capital used for production is 100 and the current amount of labour is 36. The price of a unit of capital is 4, the price of a unit of labour is 12. If you are the producer, would you rather add a bit more labour or a bit more capital to your production?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.11P

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