ECON 3411 Lecture Notes - Lecture 28: Production Function, Marginal Product

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19 Jan 2018

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Topic: productivity measures: marginal product of an input: marginal product on an input: change in total output attributable to the last unit of an input, marginal product of labor: mpl= q/ l. Measures the output produced by the last worker. Slope of the short-run production function (with respect to labor): marginal product of capital: mpk= q/ k. Measures the output produced by the last unit of capital. When capital is allowed to vary in the short run, mpk is the slope of the production function (with respect to capital). Measures of productivity: consider the following production function when 5 units of labor and. 10 units of capital are combined produce: = (10,5) = 150: compute the average product of labor. units per worker, compute the average product of capital units capital unit. Exercise: ex: q=2kl, and k=k0=1, then q=2l, graph it. Calculate mp, and ap: ex: graph q=(kl)(1/2) and k=k0=4. Guiding the production process: producing on the production function.

Related Questions

Use the following information on a hypothetical short-run production function to answer questions A-C.

The price of labor is $20 per day.

Ten units of capital are used each day, regardless of output level.

The price of capital is $50 per unit.

(A). Calculate the marginal product (MP) and average variable product (AP) of each unit of labor input.
(B). Calculate total (TC), average total (ATC), average variable (AVC), and marginal costs (MC).
(C). Can you tell where diminishing marginal returns sets in?

Labor (L)	Output (Q)	MP	AP	TC	ATC	AVC	MC
5	120	--					--
6	140
7	155
8	165
9	168

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1. The slope of the total product curve measures

a. the marginal rate of technical substitution.

b. marginal product.

c. average product.

d. the maximum average product.

e. minimum product.

2. The Law of Diminishing Returns to a variable input (such as labor) assumes that

a. there is at least one fixed input.

b. all inputs are changed by the same percentage.

c. the firm is operating in the short run.

d. all inputs are held constant.

e. a and c.

3. An isoquant curve identifies

a. the maximum output possible, given a fixed budget.

b. the different combinations of goods the can be produced, given fixed amounts of inputs.

c. the different combinations of inputs that can be used to produce a fixed rate of output.

d. none of the above.

4. The ratio of total productivity to the total quantity of a variable input being used in production is

a. equal to marginal physical productivity of the input.

b. constant as employment levels of the input vary.

c. equal to average physical productivity of the input.

d. equal to the marginal rate of technical substitution.

The following table summarizes the short-run production function for your firm. Your product sells for $8 per unit, labor costs $12 per unit, and the rental price of capital is $20 per unit. Complete the following table and then answer the accompanying questions.

1. Which inputs are fixed inputs? Which are variable inputs?

2. What is the variable cost of producing 60 units of output?

3. How many units of the variable input should be used to maximize profits? Why?

4. What are your maximum profits?

5. Over what range of variable input usage does increase marginal returns exist?

6. Over what range of variable input usage do decrease marginal returns exist?

Output	Units of Capital	Units of Labor	Marginal Product of Labor	MRP of Labor
0	6	0	--
10	6	1
30	6	2
60	6	3
80	6	4
90	6	5
95	6	6
95	6	7
90	6	8
80	6	9
60	6	10
30	6	11

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ECON 3411 Lecture Notes - Lecture 28: Production Function, Marginal Product

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