Answer to Question #297267 in Microeconomics for amsal

Question

1.    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.

a.     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.

b.    If the firms owner decide to add the 10^th x what is your advice to this owner as an economist? Support your answer with graph

c.     If the firms market is perfectly competitive, how many outputs must be produced to be at maximum profit? At maximum point how many input(x) is required? Hint assumes the above equation as total cost of production.

d.    Identify and show the production stage of the given production function.  After identifying each stage recommend the owner as an advisor of this company at each final points of the stage.

Answer 1

Labor is a variable factor of production that can be increased to increase output. The wage is the cost of hiring an additional unit of capital, the price of labor is the prevailing wage rate. The marginal cost product is the amount of output obtained by adding one more unit of this resource to the equation. If the production function is Q=3K+2L (where K stands for units of capital and L stands for units of labor), the marginal product of capital is simply three; each additional unit of capital produces three additional units of output. Costs generally follow the rule of diminishing returns: as the quantity of one factor of production increases, the marginal product of that factor decreases after a certain point.