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A firm can manufacture a product according to the production function Q = F(K,L) = K3/4L1/4

a) Compute the average product of labor, APL, when the level of capital is fixed at 16 units and the firm uses 16 units of labor. How does the average product of labor change when the firm uses 81 units of labor?

b) Find an expression for the marginal product of labor, MPL, when the amount of capital is fixed at 16 units. Then, illustrate that the marginal product of labor depends on the amount of labor hired by calculating the marginal product of labor for 16 and 81 units of labor.

c) Suppose capital is fixed at 16 units. If the firm can sell its output at a price of $100 per unit and can hire labor at $25 per unit, how many units of labor should the firm hire in order to maximize profits?

d) Now assume capital varies. If the firm has $10,000 and Labor costs $25 a unit and capital costs $50 a unit what is the greatest level out output the firm can produce?

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M9274367

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