Suppose the production function for widgets is given by: Q = f (K, L) = 2 ∗ KL − K2/2 − L2/2 (a) Suppose L=5 (is fixed), derive an expression for and graph the total product of capital curve (the production function for a fixed level of labor) and the average productivity of capital curve. (b) At what level of capital input does the average productivity reach a maximum? How many widgets are produced at this point? (c) Again, assuming L=5, derive an expression for and graph the MPK curve. At what level of capital input does MPK =0? (d) Does this production function exhibit constant, increasing or decreasing returns to scale?
Suppose the production function for widgets is given by: Q = f (K, L) = 2 ∗ KL − K2/2 − L2/2 (a) Suppose L=5 (is fixed), derive an expression for and graph the total product of capital curve (the production function for a fixed level of labor) and the average productivity of capital curve. (b) At what level of capital input does the average productivity reach a maximum? How many widgets are produced at this point? (c) Again, assuming L=5, derive an expression for and graph the MPK curve. At what level of capital input does MPK =0? (d) Does this production function exhibit constant, increasing or decreasing returns to scale?
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.2P
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Question
Suppose the production function for widgets is given by:
Q = f (K, L) = 2 ∗ KL − K2/2 − L2/2
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(a) Suppose L=5 (is fixed), derive an expression for and graph the total product of capital curve (the production function for a fixed level of labor) and the average productivity of capital curve.
-
(b) At what level of capital input does the average productivity reach a maximum? How many widgets are produced at this point?
-
(c) Again, assuming L=5, derive an expression for and graph the MPK curve. At what level of capital input does MPK =0?
-
(d) Does this production function exhibit constant, increasing or decreasing returns to scale?
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