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The production function illustrates the relationship between.......... and..................

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter7: Production, Costs, And Industry Structure

Section: Chapter Questions

Problem 12RQ: What is a production function?

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2.1 The production function illustrates the relationship between.......... and..................

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What is a production function?
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Question 19 Consider the following graph of a production function when capital is constant. (The following is a description of the figure: it shows a two-axis graph; the horizontal axis measures labor and the vertical axis measures output; for a K fixed, the graph shows that maximal production that the firm can achieve with different levels of labor; the graph starts at cero production for zero labor; then it is increasing in all of its range; three levels of labor are shown as reference; there are L1, L2, and L3; they are related as follows L1<L2<L3; the graph is convex from 0 to L1, that is, its slope is increasing; the graph is concave from L1 on, that is, its slope is decreasing; the line that is tangent to the curve at L2, passes through the origin of the graph.) From the graph we know that for the corresponding K: MPL(L2,K)=MPL(L3,K) MPL(L1,K)>MPL(L2,K) MPL(L1,K)=MPL(L2,K) MPL(L1,K)<MPL(L2,K) MPL(L3,K)>MPL(L2,K)
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