ME Tutorial 10

Q1. A firm has the following short-run production ME Tutorial 10

function:
Q = 150L + 18L2 1.5L3 Q1. A firm has the following short-run production
where Q = quantity of output per week function:
L = number of workers employed.
Q = 150L + 18L2 1.5L3
where Q = quantity of output per week
a) When does the law of diminishing returns take
L = number of workers employed.
effect?
d) When does the law of diminishing returns take
b) Calculate the range of values for labour over
effect?
which stages I, II and III occur.
e) Calculate the range of values for labour over
c) Assume that each worker is paid 15 per hour
which stages I, II and III occur.
for a 40-hour week, and that the output is
f) Assume that each worker is paid 15 per hour
priced at 5. How many workers should the firm
for a 40-hour week, and that the output is
employ?
priced at 5. How many workers should the firm
Q2. Suppose that you are given the following employ?
production function:
Q = 100K0.6L0.4 Q2. Suppose that you are given the following
Determine the marginal product of capital and the production function:
marginal product of labor when K = 25 and L = 100.
Q = 100K0.6L0.4
Determine the marginal product of capital and the
Q3. For each of the following production functions, marginal product of labor when K = 25 and L = 100.
determine whether returns to scale are decreasing,
Q3. For each of the following production functions,
constant, or increasing
determine whether returns to scale are decreasing,
a) Q = 25K0.5L0.5
constant, or increasing
b) Q = 2K + 3L + 4KL
e) Q = 25K0.5L0.5
c) Q = 100 + 3K + 2L
f) Q = 2K + 3L + 4KL
d) Q = 20K0.6L0.5
g) Q = 100 + 3K + 2L
Q4. Suppose that the average product of labor is given h) Q = 20K0.6L0.5
by the equation
Q4. Suppose that the average product of labor is given
APL = 100 + 500L - 5L2 by the equation
a) What is the equation for the total product of APL = 100 + 500L - 5L2
labor (TPL)?
d) What is the equation for the total product of
b) What is the equation for the marginal product
labor (TPL)?
of labor (MPL)?
e) What is the equation for the marginal product
c) At what level of labor usage is APL = MPL?
of labor (MPL)?
f) At what level of labor usage is APL = MPL?
Q5. Shoe & Co. manufactures shoes for export. The
production function is TP = 15L2 L3
Q5. Shoe & Co. manufactures shoes for export. The
a) If Shoe & Co., would like to achieve the highest
production function is TP = 15L2 L3
possible APL what is the labor to be employed?
d) If Shoe & Co., would like to achieve the highest
b) What can be the Average Productivity of Labor
possible APL what is the labor to be employed?
(APL) when labor employed is 7.5?
e) What can be the Average Productivity of Labor
c) What is the Marginal Productivity of Labor
(APL) when labor employed is 7.5?
(MPL) when the Average Productivity of Labor
f) What is the Marginal Productivity of Labor
(APL) is maximum?
(MPL) when the Average Productivity of Labor
(APL) is maximum?
Solutions:

Q1.

Q2.
Q3.

d. same concept as part (a)

Q4.

Q5.