Question

a. Production function can be defined as the transformation of scarce production resources into different types of goods and services meant to satisfy human wants. Given the following production function of the general form;

                y = f (x),

i.      Draw this production function showing its relationship with the Marginal and Average productivity curves.

                ii.     Clearly indicate the stages that portray the different efficient use of production resources and comment on each one of them.

                iii.    Specify which of the stages indicated in the question above is the economic stage of production and explain why?

                iv.   Define the above stages of production in terms of their elasticity of production.

                v.    Explain where diminishing returns begin?

               

b. The production of goods and services require the use of inputs or what is sometimes referred to as factors of production. The relationship between inputs and outputs is mathematically summarized in a production function. Given the production function below;

                y = 70 + 2x – 0.02x²

Derive the exact equations for; Marginal Physical Product MPP and Average Physical Product APP.

Answer 1