Econ302-hw3-spring08 - What can you say about themarginal...

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Econ302 Homework Assignment 3 Due March 5 (Questions 1, 2, and 4 will be graded) Name: 1. Trisha's Fashion Boutique production function for dresses is ( 29 1 1 3 2 , , = y K L K L where K is the number of sewing machines and L is the amount of labor hours employed. Trisha pays $15 per labor hour and sells each dress for $87.50. Also, Trisha currently has 4 sewing machines. Fill in the table below. How many units of labor will Trisha employ before the value of the marginal product of labor is less than the cost of a labor hour? y L L MP ( 29 $87.50 L MP 1 20 40 60 80 1
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2. In Example 6.3 in the textbook, wheat is produced according to the production function q = 100K 0.8 L 0.2 . a. Beginning with a capital input of 4 and a labor input of 49, show that the marginal product of labor and the marginal product of capital are both decreasing. b. Does this production function exhibit increasing, decreasing, or constant returns to scale? 2
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3. For each of the following examples, draw a representative isoquant.
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Unformatted text preview: What can you say about themarginal rate of technical substitution in each case? a. A firm can hire only full-time employees to produce its output, or it can hire some combination of full-time and part-time employees. For each full-time worker let go, the firm must hire an increasing number of temporary employees to maintain the same level of output. b. A firm finds they it can always trade two units of labor for one unit of capital and still keep output constant. c. A firm requires exactly two full-time workers to operate each piece of machinery in the factory. 3 4. Do the following functions exhibit increasing, constant, or decreasing returns to scale? What happens to the marginal product of each individual factor as that factor is increased, and the other factor is held constant? a. q = 3 L + 2 K b. q = (2 L + 2 K ) 1 2 c. q = 4 L 1 2 + 4 K 4...
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This note was uploaded on 04/29/2008 for the course ECON 302 taught by Professor Toossi during the Spring '08 term at University of Illinois at Urbana–Champaign.

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Econ302-hw3-spring08 - What can you say about themarginal...

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