Question

The production function for Ghana Rice is given by Q = 100 KL , where Q is the number of bags produced per hour K is the units of capital employed and

L is the number of workers hired each hour.

a. Calculate the Q = 1000 isoquant for this production function and illustrate it on

a diagram.

b. If K = 10 , how many workers are required to produce Q = 1000 ? What is

average productivity of Ghana Rice workers?

c. Suppose technical progress the production function to Q = 200 KL , answer

parts (a) and (b) for this new situation.

2. Assume the government has two policy options, a cash grant of GH¢200 and providing food stamps worth GH¢200.

(a) Draw the budget constraint faced by the consumer in each of these two situations.

(b) Now, draw a set of indifference curves that corresponds to an individual who would be indifferent between these two policies.

(c) Next, draw a set of indifference curves corresponding to an individual who would prefer to have a cash grant rather than food stamps.

Answer 1

a) $Q=1000$

Therefore,

 $1000 = 100KL$

$K L = 10$

b. If K = 10 , how many workers are required to produce Q = 1000 ? What is

average productivity of Ghana Rice workers?

$1000=100\times10\times L = > L=11000=100×10×L=>L=1 APL = \frac{Q}{L} = \frac {100K\times L}{L} = 100\times K = 1000APL= L Q ​ = L 100K×L ​ =100×K=1000$

c) Suppose technical progress the production function to Q = 200 KL , answer

parts (a) and (b) for this new situation.

Since $Q = 200K \times L$

 Therefore $1000 = 200KL => K\times L = 5$