The Following Table Gives the Quantities of Output That Can

question 5

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 = 2 as K varies from 1 unit to 5 units.
c. Compute the marginal product and average product of labor for K = 3 as L varies from 1 unit to 5 units.
d. Suppose the firm is producing 230 units of output using 3 units of capital and 2 units of labor. The cost of one unit of capital is $100 and the cost of one unit of labor is $5. Is the firm using a least cost combination of inputs? Why or why not?

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Definitions:

Accumulated Depreciation

The total amount of a company's asset value that has been allocated as depreciation expense since the asset was put into use.

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts, thus preparing the books for the next period.

Income Summary

An account used in the closing process that summarizes revenues and expenses for a period, transferring the net amount to retained earnings.

Sales Returns

Transactions where customers return defective, unsatisfactory or unwanted products back to the seller, resulting in a reversal of revenue.