Suppose a soap-manufacturing production process is described by the following equation: Y = a + b log K + с log L Where, Y= Output (number of soaps produced) K=Capital L=Labor a, b and c are constants Suppose 0

Suppose a soap-manufacturing production process is described by the following equation: Y = a + b log K + с log L Where, Y= Output (number of soaps produced) K=Capital L=Labor a, b and c are constants Suppose 0

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

Suppose a soap-manufacturing production process is described by the following

equation:

Y = a + b log K + с log L

Where,

Y= Output (number of soaps produced)

K=Capital

L=Labor

a, b and c are constants

Suppose 0<a<1, 0< b<1

a. Find the Marginal Product of Labor (MPL) and Marginal Product of Capital (MPK)

in the production of soap

b. Is MPL diminishing, increasing or constant as L increases?

c. Is MPK diminishing, increasing or constant as K increases?

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