Essay
The following table gives the quantities of output that can be produced with different amounts of capital and labor utilized by a firm.
a. What are the returns to scale for this firm over the range of capital and labor shown on the table? Why?
b. Compute the marginal product and average product of capital for L = 3 as K varies from 1 unit to 6 units.
c. Compute the marginal product and average product of labor for K = 4 as L varies from 1 unit to 6 units.
d. Suppose the firm is producing 300 units of output using 4 units of capital and 3 units of labor. The cost of one unit of capital is $15.00 and the cost of one unit of labor is $75.00. Is the firm using a least cost combination of inputs? Why or why not?
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a. Increasing returns to scale because d...View Answer
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