Economics 3070004
Spring 2011
1
Problem Set 3
(Due Mar 19th in class)
1.
Suppose that the production function for Prada shoes is given by
3
2
L
KL
Q
−
=
,
where
Q
is the number of Prada shoes produced per year,
K
is the machinehours of
capital, and
L
is the manhours of labor.
Fix
600
=
K
(so the labor is the single variable here).
a.
Derive the equation for average product of labor and graph the average product of
labor curve.
At what level of labor does the average product curve reach its
maximum?
b.
At what level of labor does the marginal product curve appear to reach its
maximum?
At what level does the marginal product equal zero? At what level does
marginal product curve intersect average product curve?
c.
Over what range of
L
does the production function exhibit increasing total returns?
Diminishing total returns?
Increasing marginal returns?
Diminishing marginal
returns?
2.
Consider again the production function for Prada shoes:
3
2
L
KL
Q
−
=
.
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 Spring '12
 shan
 Economics, Microeconomics, Economics of production

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