ECON 2G03 Lecture Notes - Lecture 6: Myelin Protein Zero, Marginal Product, Production Function

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whitecrab690

25 Sep 2016

School

McMaster University

Department

Economics

Course

ECON 2G03

Professor

Anastasios Papanastasiou

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Example : what is the marginal product of the cobb . Note that while mp, and mpz are constant for a linear production function for the cobb - douglas production function they depend on the values of x. Definition : the technical rate of substitution ( trs ) How much more ( orless) do we need to keep xz producing the same output , if we were to decrease ( or increase. So it we increase x , by a small amount ( 1 unit) we need to reduce x , by 312 units to keep producing the same level of output. , by a small amount we need to reduce xz by 3/2 units to produce the same level of output. Homework : find the trs for stx xd = Example : suppose we we multiply all are producing output of using double all inputs by 2 c ie some combination of inputs ( x.

Related Questions

a) Define A , K , and L

b) What does it mean that Y is proportional to A?

c) What does it mean that the marginal product of capital (MPK) and the marginal product of labor (MPL) are greater than zero? Show that the marginal products are positive in the Cobb-Douglas case.

d) What does it mean that the marginal product of capital (MPK) and the marginal product of la- bor (MPL) are decreasing? Show that the marginal products are decreasing in the Cobb-Douglas case.

e) What does it mean that the marginal product of capital (MPK) is increasing in labor? Show that the marginal product of capital increases as labor increases. Is the same true for capital?

f) Does the Cobb-Douglas production function display âconstant returns to scale?â (Doubling both inputs doubles outputs). If this is true, show it, otherwise, show it is false.

Suppose a firm in a competitive industry faces an equilibrium product price of $2 per unit of output. Table A provides information on the output produced by various amounts of labor. Use this information to complete the remaining columns of Table A, and to fill in the labor demand schedule in Table B.

Table A: Production Schedule Units of Labor Total Product

Units of Labor	Total Product	AP	MP	MRP
0	0
1	13
2	25
3	34
4	42
5	46
6	48

(a) Complete Table A, where AP is the average product of labor, MP is the marginal product of labor, MRP is the marginal revenue product of labor.

(b) Briefly explain why the marginal revenue product of labor (MRP) will be equal to the value of the marginal product of labor (V MP) in this market

Wage Rate	Quantity Demanded
24
16
8

(d) If the equilibrium market wage rate is $8, what is the equilibrium quantity of labor hired by the firm?

byzantiumhyena683

Given the following information for Mary's taco shop (TP, AP, and MP are measured in tacos):

Labor (L)	Total Product (tacos) (TP)	Average Product (tacos) (AP)	Marginal Product (tacos) (MP)
0	0	--	--
1			20
2		25
3			50
4	150
5		36
6	200
7		30
8	210

a) Fill in the blanks above. (Round each answer to the nearest taco)

Please note there are no numbers for MP and AP when output is zero tacos.

b) Define the law of diminishing marginal returns.

c) At which worker (labor) does diminishing returns start? Please explain the reasoning behind your answer.

d) If each taco could be sold for $4 per taco, and each worker is paid $70 per day then, assuming that labor is the only cost of production, how many workers should Mary hire in order to maximize profits? Please explain the reasoning behind your answer.

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ECON 2G03 Lecture Notes - Lecture 6: Myelin Protein Zero, Marginal Product, Production Function

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