Question

Touchie MacFeelie publishes comic books. The only inputs he needs are old jokes and cartoonists. His production function is Q = 0.1.J^1/2 L^3/4, where J is the number of old jokes used, L the number of hours of cartoonists' labor used as inputs, and Q is the number of comic books produced.

 (a) Does this production process exhibit increasing, decreasing, or constant returns to scale? Explain your answer.

 (b) If the number of old jokes used is 100, write an expression for the marginal product of cartoonists' labor as a function of L. Is the marginal product of labor decreasing or increasing as the amount of labor increases?

 c) Touchie MacFeelie's business manager announces that old jokes can be purchased for $1 each and that the wage

 rate of cartoonists' labor is $2.

 (i) suppose that in the short run, Touchie is stuck with exactly 100 old jokes (for which he paid $1 each) but is

 able to hire as much labor as he wishes. How much labor would he have to hire in order produce Q comic books?

 (ii) write down Touchie's short-run total cost as a function of his output

 (iii) what is his short-run marginal cost function?

 (iv) what is his short-run average cost function?

Answer 1