2. Suppose a consultant concludes that the short-run production function for sta

Question

2.  Suppose a consultant concludes that the short-run production function for stationary is equal to

Q = .9P  +  .3L,

Where P is paper and L is labor.  

a.  Does this production function have diminishing marginal returns to labor?  Why or why not?

b.  Draw the isoquant for an output level of 45.

c.  Suppose the price of paper is equal to 1 and the price of labor is equal to 2.  What combination of inputs should the firm use?

d.  Do you think that this production function is a realistic description of the production process?  Explain.

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