Solution to Practice Problems
Chapter 3
1.3
The elasticity of demand is the percentage change in quantity divided by the percentage
change in price:
=
Q p
Q
p
=
.
Q p
p Q
From the demand equation,
Q
p
is 2, so
=
10
2
80
.
= 0.250.
1.5
The elast
Solution to Practice Problems
Chapter 5
Production
2.3
The production function is
q L0.75 K 0.25 .
a. As a result, the average product of labor, holding capital fixed at
APL q / L L 0.25 K 0.25 K / L
0.25
K,
is
.
b. The marginal product of labor is
MPL d
Solution to Practice Problems
Chapter 6
Cost
2.3
a. AFC = 10/q.MC = 10. AVC = 10.AC = 10/q 10.
b. AFC = 10/q. MC = 2q. AVC = q. AC = 10/q q. See the figure below.
c. AFC = 10/q. MC = 10 8q 3q2q2. AVC = 10 4q 2q2. AC = 10/q 10 4q 2q2.
See the figure below.
1.
(a) This production always displays constant returns to scale.
(b) This production function has decreasing, constant, or increasing returns to scale as
2.
is less than, equal to, or greater than 1.
Calculations are provided in Worksheet 1, spreadsheet
Solution to Practice Problems
Production
2.3
The production function is
q L0.75 K 0.25 .
a. As a result, the average product of labor, holding capital fixed at
APL q / L L 0.25 K 0.25 K / L
0.25
K,
is
.
b. The marginal product of labor is
MPL dq /dL 3 K