In-class production exercise - solutions

In-class production exercise - solutions - In-Class Group...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: In-Class Group ExerciseA firms production function is given by 2121LKQ=and its capital is fixed at 1 unit.a.Calculate the average product of labor (APL) when 9 units of labor are utilized.391===LKQunits produced APL= Total Q / Total Labor (just the same avg youve known since middle school)Plugging in we get:3193==LAPb.Calculate the marginal product of labor (MPL) when 9 units of labor are utilized.Remember, (MPL) = Q / L = derivative of the function with respect to L.\2121LKQ=MPL=LKLKdLdQ1**2121/2/12/1==-, now plug in K=1 & L=9MPL=6131*2191*21/===dLdQ(so MPL= 1/6)c.Suppose the firm can hire labor at a wage of $10 per hour and output can be sold at a price of $100 per unit. Determine the profit-maximizing levels of laborand output.This is a 2-part problem: 1)The profit-maximizing point is the point where the value marginal product is equal to the wage (i.e. VMP = w). Hence, find the MPL such that VMP isequal to the wage2)Find what level of labor Lcorresponds to that MPLPart 1Recall that VMP = price * MP...
View Full Document

Page1 / 2

In-class production exercise - solutions - In-Class Group...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online