The Following Table Gives the Quantities of Output That Can

question 19

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 = 4 as K varies from 1 unit to 5 units.
c. Compute the marginal product and average product of labor for K = 1 as L varies from 1 unit to 5 units.
d. Suppose the firm is producing 376 units of output using 1 units of capital and 4 units of labor. The cost of one unit of capital is $39.50 and the cost of one unit of labor is $11.00. Is the firm using a least cost combination of inputs? Why or why not?

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Definitions:

Broadly Defined Good

Broadly defined goods encompass a range of products or services that cater to a wide variety of needs and preferences in the market.

Available Substitutes

Alternative products or services that consumers can use in place of another product or service.

Inelastic Portion

The segment of a demand curve where the quantity demanded changes very little with a change in price.

Demand Curve

A graphical representation of the relationship between the price of a good and the quantity demanded by consumers.