New Problem

#of workers CAPITAL INPUT k (BHP BRAKE HORSEPOWER)

L abor Input 250 500 750 1,000 1250 1500 1750 2,000

In the Deep Creek Mining Company example described above suppose again that labor is the variable input and capital is the fixed input. Specifically, assume that the firm owns a piece of equipment having a 500bhp rating

1. Complete the following table:

   Labor Input (Numbers of workers.	Total PRODUCT TPL (=Q)	Marginal PRODUCT MPL (∆Q +∆L)	Average PRODUCT OF LABOR APL (Q+L)
   1
   2
   3
   4
   5
   6
   7
   8
   9
   10

2. Plot the (i) total Product, (ii) marginal product, and (iii) average product function.

New Problem

Consider the following short-run production function (where L = Variable input, Q=output):

Q= 10 L - 0.5 L²

Suppose that output can be sold for $10 per unit. Also assume that the firm can obtain as much of the variable input ( L ) as it needs at $20 per unit.

1. Determine the marginal revenue product function.
2. Determine the marginal factor cost function.
3. Determine the optional value of L, given that the objective is to maximize profits.

New Problem

Consider the following Cob-Douglas production function for the bus transport system I a particular city.

Q=a L β¹ Fβ² Kβ³

Where

L= Labor input in worker hours

F= fuel input in gallons

K= capital input in number of buses

Q= output measured in millions of bus miles

Suppose that the parameters ( a β¹ β² β³) of this model were estimated using annual data for the past 25 years. The following results were obtained

A=0.0012 β ¹ = 0.45 β ² = 0.20 β ³= 0.30

1. Determine th (i) labor, (ii) fuel, and (iii) capital input production elasticities.
2. Suppose the labor input (worker hours) is increased by 2 percent next year. Assuming that the other inputs are held constant, determine the approximate percentage change in output.
3. Suppose the capital input (number of busses) is decreased by 3 percent. Assuming that other inputs are held costant, determine the approximate percentage change in output.
4. What type of returns to scale appears to characterize this bus transportation system(ignore issues of statistical significance)

Price: $9.28

Solution: The downloadable solution consists of 5 pages, 428 words and 1 charts.
Deliverable: Word Document