• Any point below the PS characterizes inefficiency.Theory of Production...QUESTIONS(1) Given CD PF of• If A = 25, and a = /,Q = AK" L'-aDetermine:AP = TP/LMP,= dTP/ƏLMPK = dTP/ƏK(2) Given a PF of the type1-aDetermine:Q = AK" + L"• AP = TP/L• MP,= dTP/ƏLMPK = dTP/ƏK%3D(3) If in (1) above, A = 100, a = 0.6, K = 25, and L= 100,determine MPL, MPK, AP, APK and TP.%3DTheory of Production..(4) Suppose a production function is represented byQ = F(K,L) = 600K²L² - K3L3• To construct MP, and AP, assume that K = 10• The production function becomesq = 60,000l2 - 10ool3Q = 60,000L? - 1000L3The marginal productivity function isMPL = dTP/dL = 120,000L - 30ooL? which diminishes as L increases• This implies that Q has a maximum value:• 120,000L - 30ooL? = 0; 40L = L2; L = 40• Labour input beyond L= 4o reduces output.• To find average productivity, we hold K=10 and solve AP, = Q/L = 60,000L1000L?• AP, reaches its maximum where ô APL/L = 60,000 - 2000L = 0; L = 30• In fact, when L = 30, both APL and MPL are equal to 900,000%3D• Thus, when AP_ is at its maximum, AP, and MP are equalTheory of Production...Long Run production function• The long run is a period sufficiently long that all inputs ofproduction including capital can be adjusted or are all variables.Long-run production function therefore shows the maximumquantity of output that a firm can be produced using a set ofinputs with the assumption of varying all inputs.• With this the firm can choose any combination of inputs forproduction.• One approach to choosing the optimal (least costly) mix of inputsis to compare the (marginal) cost of producing one extra unit ofoutput across different inputs.

Marginal product of labour means a unit change in labour how much TP will change . Whereas MPK…

Theory QUESTIONS (1) Given CD PF of - If A = 25, and a = Q = AK“L-a || /2 %3D - Determine: - AP = TP/L - MPL= dTP/ƏL - MPK = dTP/ƏK %3D %3D - (2) Given a PF of the type - Determine: - AP = TP/L - MPL= dTP/ƏL - MPK = dTP/dK Q = AK" + L'a %3D %3D (3) If in (1) above, A = 100, a = 0.6, K = 25, and L= 100, determine MPL, MPK, APL, APK and TP. %3D %3D

Theory QUESTIONS (1) Given CD PF of - If A = 25, and a = Q = AK“L-a || /2 %3D - Determine: - AP = TP/L - MPL= dTP/ƏL - MPK = dTP/ƏK %3D %3D - (2) Given a PF of the type - Determine: - AP = TP/L - MPL= dTP/ƏL - MPK = dTP/dK Q = AK" + L'a %3D %3D (3) If in (1) above, A = 100, a = 0.6, K = 25, and L= 100, determine MPL, MPK, APL, APK and TP. %3D %3D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Economic Growth

It means the rise in the manufacturing levels of a country’s products/services over a while. It is calculated in terms of the real income of the people of the country. When the production of products/services begins, the manufacturers will hire employees, which in turn raises the income of the people and it will also raise the buying power, this eventually leads to the circulation of money that directly helps in the increase in the Gross Domestic Product (GDP). Thus, GDP is calculated by economists to calculate the growth in the country.

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