Question 15
Consider the following figure (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 level of 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; five units of labor is shown as reference in the horizontal axis; the corresponding production for this level of labor is 200; the graphs slope is initially increasing, then there is an inflexion point to the left of five levels of labor; after this inflexion point, the slope of the graph is decreasing; a line that passes through zero and is tangent to the graph is also shown; this line is tangent to the graph for a level of labor that is to the left of 5.)
Denote by APL(L,K)=f(L,K)/L the so-called average product of labor (here f is the production function of the firm). From the graph we learn that for the corresponding K:
APL(5,K)=52
APL(5,K)=100
APL(5,K)=205
APL(L,K) is decreasing in all the range of L shown in the figure.
APL(5,K)=40
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images
