Production Point Capital (K) Labor (L) Output (Q) A 1 1 2 B 2 2 C 1 3 D 2 4 E 1 5 F 2 6 G 1 7 H 2 8 X The profuction function is given as: Q=αK + βL B andf E lie on the same isoquant, while D and G are on a higher isoquant. 2. a. Holding capital fixed at one unit, plot the average product of labor (or productivity of labor), and verify that the standard relationship between the marginal and average product of labor holds.
Production Point Capital (K) Labor (L) Output (Q) A 1 1 2 B 2 2 C 1 3 D 2 4 E 1 5 F 2 6 G 1 7 H 2 8 X The profuction function is given as: Q=αK + βL B andf E lie on the same isoquant, while D and G are on a higher isoquant. 2. a. Holding capital fixed at one unit, plot the average product of labor (or productivity of labor), and verify that the standard relationship between the marginal and average product of labor holds.
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.7P
Related questions
Question
| Production Point | Capital (K) | Labor (L) | Output (Q) |
| A | 1 | 1 | 2 |
| B | 2 | 2 | |
| C | 1 | 3 | |
| D | 2 | 4 | |
| E | 1 | 5 | |
| F | 2 | 6 | |
| G | 1 | 7 | |
| H | 2 | 8 | X |
The profuction function is given as: Q=αK + βL
B andf E lie on the same isoquant, while D and G are on a higher isoquant.
2.
a. Holding capital fixed at one unit, plot the average product of labor (or productivity of labor), and verify that the standard relationship between the marginal and average product of labor holds.
b. Which input exhibits diminishing marginal returns? Explain how you arrived at this answer.
c. What is the intuition behind diminishing marginal returns? Why do we typically observe diminishing marginal returns in real life?
d. In this problem, are capital and labor perfect substitutes? Explain.
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