In: Economics
Question Three
If the long-run production function is q = 0.4KL 0.5 , what is the firm’s short-run production function if K = 5 units? What is the firm’s output when L = 16 workers? What is the firm’s marginal product of labor and the average product of labor when L = 16 workers? Does this production function exhibit diminishing returns to labor?
Question Four
Suppose that 3M has the production function q=KL, and the input prices are given by r=$2, w=$3. The 3M wants to produce 600 unit of output and minimize cost of production.
(a) What amounts of capital and labor inputs should be used by the 3M?
(b) What is the minimum cost of production?