Consider a short run production function q=5L+K, using L units of labour and K units of capital. Compute the marginal product of labour. 2. Does the production function exhibit decreasing, increasing or constant returns to scale?
Consider a short run production function q=5L+K, using L units of labour and K units of capital.
- Compute the marginal product of labour.
2. Does the production function exhibit decreasing, increasing or constant returns to scale?
Production function is a function which shows the relationship between the output and the number of workers employed in producing that particular amount of output. The production function has many forms and the most widely used is the Cobb-Douglas Production function which has a linear form and a variety of features as well.
- The Marginal product of labor can be calculated by differentiating the production function in terms of labor only.
So, the marginal product of labor will be q=5+K
- The production function exhibits increasing returns to scale. The increasing returns to scale implies that with the combinations of inputs, the calculated output will always be more as compared to the inputs used. Hypothetically a table can be formed and Q can be estimated by putting the imaginary values of L and K in the production function q=5L+K. The table can be:-
|
L |
K |
q= 5L+K |
|
1 |
5 |
10 |
|
2 |
4 |
14 |
|
3 |
3 |
18 |
|
4 |
2 |
22 |
|
5 |
1 |
26 |
So, it can be witnessed that there is an increasing pattern with the inputs being less. So, the production function exhibits an increasing return to scale.
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