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BS-BSP 210 Tutorial Sheet 3 PDF

The document discusses production functions and their properties. It contains 5 questions about production functions, marginal products, average products, returns to scale, and the marginal rate of technical substitution. Specifically: 1. It asks to determine average and marginal products, economies of scale, and the marginal rate of technical substitution given different production functions. 2. It discusses the Cobb-Douglas production function and how returns to scale are indicated based on the values of the coefficients. 3. It asks to graph an isoquant for a production function and calculate marginal rates of technical substitution at different input levels. 4. It asks how an isoquant would shift with technological progress.

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102 views2 pages

BS-BSP 210 Tutorial Sheet 3 PDF

The document discusses production functions and their properties. It contains 5 questions about production functions, marginal products, average products, returns to scale, and the marginal rate of technical substitution. Specifically: 1. It asks to determine average and marginal products, economies of scale, and the marginal rate of technical substitution given different production functions. 2. It discusses the Cobb-Douglas production function and how returns to scale are indicated based on the values of the coefficients. 3. It asks to graph an isoquant for a production function and calculate marginal rates of technical substitution at different input levels. 4. It asks how an isoquant would shift with technological progress.

Uploaded by

Mwango
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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THE COPPERBELT UNIVERSITY

School of Humanities and Social Sciences


Department of Economics

BS/BSP 210: Intermediate Economic Theory and Practice


Tutorial Sheet 3: Production Functions (Production Theory)

1. What are the 2 main goals for every producing firm?


2. Suppose you are given the following production function;

𝑄 = 100𝐾 0.5 𝐿0.5

a) Find the average product of labour and capital.


b) Calculate the marginal product of labour and capital.
c) Determine the marginal rate of technical substitution for labour and capital.
d) Given that 𝐾 is 25 and 𝐿 is 100;
i. What is the total quantity produced?
ii. What is the marginal product of labour for capital in b) above?
e) Determine the economies of scale.
3. You are given the following production function that uses labour as the only input in
production;
𝑄 = 60,000𝑙 2 − 1000𝑙 3
a) Find the marginal product of labour (MPL).
b) What is the value of labour when MPL is at maximum and what does it imply?
c) Find the average product of labour (APL).
d) What is the value of labour when APL is at maximum?
e) What is the value of the APL and MPL when APL is at maximum?

1
4. The Cobb Douglas production function is used widely in economic research, it is given
as 𝑄 = 𝐾 𝛼 𝐿𝛽 where 0 ≤ 𝛼, 𝛽 ≤ 1. Present the following information on different
isoquants, indicating the type of returns to scale exhibited and interpret what each
means.
a) If 𝛼 + 𝛽 = 1, a doubling of 𝐾 and 𝐿 will double 𝑄.
b) If 𝛼 + 𝛽 < 1, a doubling of 𝐾 and 𝐿 will less than double 𝑄.
c) If 𝛼 + 𝛽 > 1, a doubling of 𝐾 and 𝐿 will more than double 𝑄.
5. Suppose the hourly output of chicken pieces at Fountain Restaurant is given by;
𝑄 = 20√𝐾𝐿 where 𝐾 is the number of braai stands used and 𝐿 is the labour employed
to braai the chicken pieces.
a) Graph the 𝑄 = 2000 isoquant.
b) What is the approximate value of the MRTS when 𝐾 = 25 and 𝐿 = 400?
c) What is the approximate value of the MRTS when 𝐾 = 50 and 𝐿 = 200?
d) What is the approximate value of the MRTS when 𝐾 = 100 and 𝐿 = 100?
e) What is the approximate value of the MRTS when 𝐾 = 200 and 𝐿 = 50?
f) From your observations in b) to e), what would you comment about your results?
g) Suppose there was technological progress, what is expected to happen to the
isoquant? and what does this imply? Kindly illustrate on a separate graph.

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