17. Consider q is output level, K is capital input and L is labour input. In the short run, capital input is fixed at Ko. Labour input varies from 0 to 5. Production function is given by q = K LP. (a) Suppose a =B=0.5. Calculate the short-run outputs when labour input is 0, 1, 2, 3, 4, and 5 respectively. Calculate the total product and then use the total product values to calculate the marginal product and average product. Indicate whether or not marginal product is diminishing. (b) Suppose a = B = 0.5. Does this production function exhibit constant, increasing or decreasing returns to scale? Using the definition of returns to scale to explain. (c) Suppose a = ß= 1. Does this production function exhibit constant, increasing or decreasing returns to scale? Using the definition of returns to scale to explain. (d) Initially, L = K = 1. If the production function exhibits constant returns to scale, and a = 0.2, what is the value of ß?

17. Consider q is output level, K is capital input and L is labour input. In the short run, capital input is fixed at Ko. Labour input varies from 0 to 5. Production function is given by q = K LP. (a) Suppose a =B=0.5. Calculate the short-run outputs when labour input is 0, 1, 2, 3, 4, and 5 respectively. Calculate the total product and then use the total product values to calculate the marginal product and average product. Indicate whether or not marginal product is diminishing. (b) Suppose a = B = 0.5. Does this production function exhibit constant, increasing or decreasing returns to scale? Using the definition of returns to scale to explain. (c) Suppose a = ß= 1. Does this production function exhibit constant, increasing or decreasing returns to scale? Using the definition of returns to scale to explain. (d) Initially, L = K = 1. If the production function exhibits constant returns to scale, and a = 0.2, what is the value of ß?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

17 Please make sure your answer is correct and I will give a positive review!

17. Consider q is output level, K is capital input and L is labour input. In the short run,
capital input is fixed at Ko. Labour input varies from 0 to 5. Production function is
given by q = K LP.
(a) Suppose a =B=0.5. Calculate the short-run outputs when labour input is 0,
1, 2, 3, 4, and 5 respectively. Calculate the total product and then use the
total product values to calculate the marginal product and average product.
Indicate whether or not marginal product is diminishing.
(b) Suppose a = ß = 0.5. Does this production function exhibit constant,
increasing or decreasing returns to scale? Using the definition of returns to
scale to explain.
(c) Suppose α = ß = 1. Does this production function exhibit constant,
increasing or decreasing returns to scale? Using the definition of returns to
scale to explain.
(d) Initially, L = K = 1. If the production function exhibits constant returns to
scale, and a = 0.2, what is the value of ß?

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