Problem 1 (20 points) A firm that manufactures office desks has the following pr
ID: 1180702 • Letter: P
Question
Problem 1 (20 points)
A firm that manufactures office desks has the following production function in the short run:
Q = 400 L0.8 K0.5
where
Q = the quantity of chairs produced in a month
L = the amount of labor (hours of work) used in a month
K = the amount of capital (building, machines, equipment) used.
Assume that in the short run L = 1,000 and K = 100.
3. What is the quantity produced if L = 1,400 and K = 100?
A firm that manufactures office desks has the following production function in the short run: Q = 400 L0.8 K0.5 where Q = the quantity of chairs produced in a month L = the amount of labor (hours of work) used in a month K = the amount of capital (building, machines, equipment) used. Assume that in the short run L = 1,000 and K = 100. Does the law of diminishing marginal returns to labor apply to the production process? Why? Why not?Explanation / Answer
(1) if L = 1,000 and K = 100
Q = 400 L0.8K0.5
Q= 1004754.573 chairs produced in a month.
(2) if L = 1,400 and K = 100
Q = 400 L0.8K0.5
Q = 1315111.029 chairs produced in a month.
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