Toyota hired you as a manager for its operation in Pakistan. Suppose that the following is the short-run production function at their assembly plant in Pakistan: Q = 7L + 0.6L2 – 0.1L3 where L = Labor (Number of workers), Q is quantity of output (Cars assembled) per week Find the labor value when the MPL is Maximum.Find the value of MPL at its maximum.Assume Toyota Head Office is considering hiring more laborers either at their Quetta plant or alternatively at the Karachi plant. What will be your advice if workers’ marginal product is 400 at wage of Rs=100/hour in Karachi and marginal product is 350 at wage of Rs=800/hour in Quetta? At the end of the year it is expected that output will double with purchase of new equipment and machinery. The long-run production function is estimated to be Q = 60L+ 50K + 200 where L is labor and K is capital. Suppose initial L1 = 15 and K1 = 20 When inputs are increased to L2 = 30 and K2 = 40, do you observe increasing, decreasing or constant returns to scale? Explain your answer.

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Toyota hired you as a manager for its operation in Pakistan. Suppose that the following is the short-run production function at their assembly plant in Pakistan:

Q = 7L + 0.6L²– 0.1L³ where L = Labor (Number of workers), Q is quantity of

output (Cars assembled) per week

Find the labor value when the MP_Lis Maximum.
Find the value of MP_Lat its maximum.
Assume Toyota Head Office is considering hiring more laborers either at their Quetta plant or alternatively at the Karachi plant. What will be your advice if workers’ marginal product is 400 at wage of Rs=100/hour in Karachi and marginal product is 350 at wage of Rs=800/hour in Quetta?
At the end of the year it is expected that output will double with purchase of new equipment and machinery. The long-run production function is estimated to be

Q = 60L+ 50K⁺ 200 where L is labor and K is capital.

Suppose initial L₁ = 15 and K₁ = 20 When inputs are increased to L₂ = 30 and K₂= 40, do you observe increasing, decreasing or constant returns to scale? Explain your answer.

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