Chapters%206%20-%208

Chapters%206%20-%208 - Sample Problems 1 Assume that the...

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Sample Problems 1. Assume that the following table represents the short run production function q = f(L): L Q 0 0 1 7 2 24 3 39 4 53 5 61 6 70 7 77 8 83 9 88 10 87 a. Calculate the marginal product and average product of labor for each value of L. b. Draw a graph of the total product, marginal product and average product curves. Connect the points with smooth curves. 2. Assume that Firm A has the following production function: Q A = 100K A 0.5 L A 0.3 . Determine the returns to scale of Firm A’s production function. Now suppose that Firm B has the following production function, Q B =80K B + 45L B . Determine the returns to scale of Firm B’s production function. 3. Assume in the long run that a firm uses 30 units of labor and 60 units of capital to produce output q* when the market wage is $40 and the rental rate is $60. Assume further that the marginal product of labor is 20 and the marginal product of capital is 40 when L is 30 and K is 60. You may assume that the isoquants for the production function are strictly convex. Is the firm maximizing long run profits? Explain your answer. If your answer is no, what actions should the firm take? 4.
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This note was uploaded on 05/02/2009 for the course ECON 300 taught by Professor Danbrown during the Spring '09 term at University of Delaware.

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Chapters%206%20-%208 - Sample Problems 1 Assume that the...

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