Answer to Question #286323 in Microeconomics for karree

Question

A marketing research conducted by firm company result shows the firms production function and its demand as the following equation.  And the demand function is given by 100. Using the given information answer the following question.

If you are this firms manager how are you suggest your firms owner to add the input x in order to be at maximum average production? Support your suggestion with evidence from the production function given

Answer 1

The human work that goes into production is referred to as labor. Typically, economists believe that labor is a variable input of production that may be increased to boost output. Because wages are the cost of hiring an additional unit of capital, the price of labor is the prevailing pay rate. The marginal product of an input is the amount of output gained by adding one more unit of that input to the equation. Take the derivative of the production function in terms of the relevant input to find it. If the production function is Q=3K+2L (where K denotes units of capital and L denotes units of labor), the marginal product of capital is simply three; every extra unit of capital produces three additional units of output. Inputs are usually susceptible to the rule of diminishing returns, which states that as the amount of one factor of production grows, the marginal product of that factor decreases after a certain point.