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In the short run, a firm cannot vary its capital and operates with K = 9. It can, however, vary the amount of labor (L) that it uses. For each production function below, explain why the firm will or...

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In the short run, a firm cannot vary its capital and operates with K = 9. It can, however, vary the amount of labor (L) that it uses. For each production function below, explain why the firm will or will not experience diminishing marginal returns to labor in the short run.

a. q = 35L + 40K

b. q = L0.5 K0.5

c. q = min{3L, 2K}

Answered 90 days After Jan 03, 2022

Solution

Soma answered on Apr 03 2022
106 Votes
a. q = 35L + 40K
K= 9,
Q= 35L+ 40*9
= 35L+ 360
This is a production function where the labour and capital are perfect substitutes
capital
Labou
Q= MPL= dQ/dL = 35 is constant
Here the labour and capital are substitutes at constant rate, does not depend on the level of inputs employed.
Thus, this production function does not show any diminishing marginal returns.
B
q = L0.5 K0.5
This is a Co
Douglus production function
Capital K
Labour L
MPL = dq/dL = 0.5L^(-0.5)...
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