REC 3 - ECO303.02 Recitation #3 1) Laura's Internet...

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ECO303.02 Recitation #3 1) Laura's Internet Services firm can design computer systems according to the function y(K, L) = 3 KL , where K is the amount of Gigabyte storage she has available and L is the amount of labor hours she employs. Currently, Laura has 125 gigabytes of storage. Sketch the change in the marginal product of labor curve for Laura's firm for values of L = 1, 2, 3, 4, and 5, if she increases her gigabyte storage capacity to 216. Answer: We can approximate the change in the marginal product of labor as indicated in the following table. The marginal product of labor has increased when Laura added additional storage capacity. A sketch of the marginal product of labor is 2) Bridget's Brewery production function is given by y(K, L) = 2 KL , where K is the number of vats she uses and L is the number of labor hours. Does this production process exhibit increasing, constant or decreasing returns to scale? Holding the number of vats constant at 4, is the marginal product of labor increasing, constant or
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ECO303.02 Recitation #3
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This note was uploaded on 12/14/2010 for the course ECO 303 taught by Professor Yunshanchan during the Fall '08 term at SUNY Stony Brook.

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REC 3 - ECO303.02 Recitation #3 1) Laura's Internet...

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