Question #283515

Suppose the short run production function can be represented by

Q=60,000L^2-1000L^3 then, determine

A) the level labor employement that maximazes the level of output

B) the level of employment that maximazes APL and the maximum APL


1
Expert's answer
2021-12-30T15:20:24-0500

A) the level labor employment that maximizes the level of output


The total output will be maximized when the marginal product is equal to zero.

MPL=dQdLMPL=120,000L3000L2=0L(120,0003000L)=0120,0003000L=03000L=120,0000L=120,0003000=40MPL=\dfrac{dQ}{dL}\\[0.3cm] MPL = 120,000L– 3000L^2=0\\[0.3cm] L(120,000– 3000L)=0\\[0.3cm] 120,000– 3000L=0\\[0.3cm] 3000L=120,0000\\[0.3cm] L^*=\dfrac{120,000}{3000}=40


B) the level of employment that maximizes APL and the maximum APL


The average product is maximized when the marginal product is equal to the average product.


The average product is;

AP=QLAP=60,000L1000L2AP=\dfrac{Q}{L}\\[0.3cm] AP=60,000L-1000L^2

Therefore;

60,000L1000L2=120,000L3000L24000L2=60000L4000L=60000L=600004000=1560,000L-1000L^2=120,000L-3000L^2\\[0.3cm] 4000L^2=60000L\\[0.3cm] 4000L=60000\\[0.3cm] L=\dfrac{60000}{4000}=15

The maximum average product is equal to;

AP=60,000(15)1000(15)2AP=675,000AP=60,000(15)-1000(15)^2\\[0.3cm] AP=675,000

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