MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
Question
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Chapter 5, Problem 1CACQ

a)

To determine

To Calculate:The average product of labor when capital is 81units and variable input, labor is 16units and also whenvariable input, labor changes to 256units.

a)

Expert Solution
Check Mark

Explanation of Solution

  APL=QL=K 3/4L 1/4L=( K L)3/4Average prodcut of labor when capital is 81 and labor is 16.APL=( K L)3/4APL=( 81 16)3/4=( 3 2)3=3.375

  APL when capital is 81 and labor is 256APL=( 81 256)3/4=( 3 4)3=0.422

b)

To determine

To calculate:Marginal product of labor.

b)

Expert Solution
Check Mark

Explanation of Solution

  MPL=dQdL=K3/4(1/4)L141=14( K L)3/4MPL When capital is 81.MPL=14( 81 L)3/4=6.75L 0.75

  MPL When capital is 81 and labor is 16.MPL=6.75 16 0.75=0.844MPL When capital is 81 and labor is 81.MPL=6.75 81 0.75=0.250

c)

To determine

To calculate: Number of labor that a firm should hire.

c)

Expert Solution
Check Mark

Explanation of Solution

  VMPL=when capital is 81 = (MPL when capital is 81)×$200=6.75L 0.75×$200=1350L 0.75

Number of labors hired to maximize the profit.

  VMPL when capital is 81 = $5001350L 0.75=50L=81

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