Question 2a) Briefly explain why the short run average variable cost of production is U-shaped.b) State the main difference between diminishing returns to a variable factor anddecreasing returns to scale in production.c) Consider the production function, q=30Kº4 Lº4, where q is output, K is capital,and Lis labour units.i)What is the returns to scale property of the above production function?ii)Assuming the cost of production is given as C=vK+wL, where v and ware unit prices of capital and labour respectively, find the optimal level ofand L that should be employed.目

Production function depicts the relationship between the output and the inputs that is it…

Question 2 a) Briefly explain why the short run average variable cost of production is U-shaped. b) State the main difference between diminishing returns to a variable factor and decreasing returns to scale in production. c) Consider the production function, q = 30K04104, where q is output, K is capital, and Lis labour units. i) What is the returns to scale property of the above production function? ii) Assuming the cost of production is given as C= vK+wL, where v and w are unit prices of capital and labour respectively, find the optimal level of and L that should be employed. 00 €

Question 2 a) Briefly explain why the short run average variable cost of production is U-shaped. b) State the main difference between diminishing returns to a variable factor and decreasing returns to scale in production. c) Consider the production function, q = 30K04104, where q is output, K is capital, and Lis labour units. i) What is the returns to scale property of the above production function? ii) Assuming the cost of production is given as C= vK+wL, where v and w are unit prices of capital and labour respectively, find the optimal level of and L that should be employed. 00 €

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Step 1: Define Production function.

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Step 2: Explain why the short run average variable costs of production curve is U-shaped.

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Step 3: Explain the difference.

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Step 4: Explain the return to scale property.

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Step 5: Find the optimal level of K and L.

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Assume a Cobb-Douglas production function of the form: 3 What type of returns to scale does this production function exhibit? In this instance, returns to scale equal This production function exhibits q=10L0.28K0.59 (Enter a numeric response using a real number rounded to two decimal places.) OA. increasing returns to scale. OB. constant returns to scale. OC. initially decreasing but then constant returns to scale. O D. decreasing returns to scale. O E. initially constant but then decreasing returns to scale.
1. Given the production function: q = 2KL, (a) Fill in the table below which has information on the short-run production function, the marginal product of labor (MPL), and the average product of labor (APL) if capital is held fixed at 3 units in the short-run. Labor Quantity of Output (MPL) (APL) 0 1 4 9 16 25 (b) Plot the short-run production function. (c) Plot the marginal and average products of labor on a new graph. (d) Does the law of diminishing marginal returns apply? If so, at what level of labor do diminishing marginal returns set in? (e) What is the relationship between the marginal product of labor (MPL) and the average product of labor (APL)? (f) If the amount of capital increased to 6 units, what would happen to your graphs in part C)?
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Looking at the following plot of a firm's production function, represented by isoquants for production levels and isocost lines for different total costs of production. Which of the following are true? 101 00 9 K, Capital per unit time Cost $38.80 2 Cost $18:40 6 L. Labour per unit time 10 Y Y 4 Y 2 a. Points a and b are each cost minimizing points for the firm at different levels of output. b. Point d will have higher output and lower total cost than point c c. Point e has less output than point b, but a higher total cost. d. The production function exhibits increasing returns to scale. e. It's clear that Point c does not correspond to a cost-minimizing bundle of inputs.