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?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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
= 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
KO5L0.5. The current
%3D
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?
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