4. A firm producing cars. The production function for shoes (Q) is: Q = K2 L"2 where K is capital and L islabor. The price of K is $8 and the price of L is $2.a. What type of production function is this?b. Does this production function exhibit constant, increasing or decreasing returns to scale?Explain.c. What is the average product of capital, average product of labor, marginal product of capital,and marginal product of labor?d. Does capital obey the "law of diminishing returns?" Explain.e. Suppose that firm wants to produce 144 cars, how much K and L should be employed tominimize costs?f. What is the minimum cost of producing 144 cars?g. Now suppose that firm is faced with the same problem as in (e and f) except that firm has afixed amount of K. In fact, K = 16. How much L should be employed to minimize costs, andwhat is the total cost.

A firm producing cars. The production function for shoes is : Q= K1/2 L1/2 .…

shoes (Q) irm producing car labor. The price of K is $8 and the price of L is $2. production vhere K is capital and . a. What type of production function is this? b. Does this production function exhibit constant, increasing or decreasing returns to scale? Explain. c. What is the average product of capital, average product of labor, marginal product of capital, and marginal product of labor? Does canital obev the "law of diminishing returns?" Explain

shoes (Q) irm producing car labor. The price of K is $8 and the price of L is $2. production vhere K is capital and . a. What type of production function is this? b. Does this production function exhibit constant, increasing or decreasing returns to scale? Explain. c. What is the average product of capital, average product of labor, marginal product of capital, and marginal product of labor? Does canital obev the "law of diminishing returns?" Explain

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

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4. A firm producing cars. The production function for shoes (Q) is: Q = K2 L"2 where K is capital and L is
labor. The price of K is $8 and the price of L is $2.
a. What type of production function is this?
b. Does this production function exhibit constant, increasing or decreasing returns to scale?
Explain.
c. What is the average product of capital, average product of labor, marginal product of capital,
and marginal product of labor?
d. Does capital obey the "law of diminishing returns?" Explain.
e. Suppose that firm wants to produce 144 cars, how much K and L should be employed to
minimize costs?
f. What is the minimum cost of producing 144 cars?
g. Now suppose that firm is faced with the same problem as in (e and f) except that firm has a
fixed amount of K. In fact, K = 16. How much L should be employed to minimize costs, and
what is the total cost.

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