Middle East Technical University
Spring 2011
Department of Economics
ECON 201
Erol Çakmak
TA: Osman Değer
PROBLEM SET 6
1)There is a firm whose production function is Q= aK
0.15
L
0.35
and its expansion path is defined
as K=4L. When this firm behaves rationally, it produces 230 amount of output with K= 8. If this
firm had used 32 units of K, what would be the efficient production point for this firm?
2) Ba
ş
ak wants to go into the donut business. For $500 per month she can rent a bakery
complete with all the equipment she needs to make a dozen different kinds of donuts (
K
=l,
r
=500). She must pay unionized donut bakers a monthly salary of $400 each. She projects her
monthly production function to be
Q
= 5
KL
where
Q
is tons of donuts.
a. With the current level of capital, what is the marginal product of labor? Is the marginal
product diminishing? Explain.
b. If Ba
ş
ak wishes to make 25 tons of donuts, how many bakers are required given the current
level of capital? How much will it cost to produce this (totalcost)?
c. Derive Ba
ş
ak
ʹ
s short
‐
run cost function with K=1.
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 Fall '10
 çAKMAK
 Economics, marginal cost curve, Selin

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