Managerial Economics

Tutorial 5
Q1. You are given the following information:

Output 50 50 50 50 50 50 50 50

Unit of Labor 10 15 20 25 30 35 40 45

Units of Capital 70 68 57 47 38 30 23 17

Questions: (i) Using the above information draw a curve. What do we call such a curve.? (ii) Find MRTSL,K for each combination. Q2. Suppose that you are given the following production function:

Q = 100K0.6L0.4
Determine the marginal product of capital and the marginal product of labor when K = 25 and L = 100. Q3. For each of the following production functions, determine whether returns to scale are decreasing, constant, or increasing a) Q = 25K0.5L0.5 b) Q = 2K + 3L + 4KL c) Q = 100 + 3K + 2L d) Q = 20K0.6L0.5 Q4. Consider the following Cobb-Douglas production function

Q = 56K0.38L0.72
a) Calculate elasticity of production with respect to labor. b) Calculate elasticity of production with respect to capital.

Population Demand P D 10 70 15 68 20 57 25 47 30 38 35 30 135 310 P D

P2 100 225 400 625 900 1225 3475 P2

D2

PD 4900 4624 3249 2209 1444 900 17326 D2 PD

700 1020 1140 1175 1140 1050 6225

= nPD - PD / P2 - (P)2