(ene ay 238 TECHNOLOGY (Ch. 19) \ Returns to Seale and Changes in Marginal Products For each production function in the table below, put an I, , or D in the first column if the production function has increasing, constant, or ccreasing returns to scale, Put an Z, C, or D in the second (third) column, depending on whether the marginal produet of factor 1 (factor 2) is Increasing, constant, or decreasing, as the amount of that factor alone is varied, S(er,z2) | Seale | MP, | MP, | nyt 2er Cle c vavm | D| D| D 2er29 ade GLa € ayltagit & D D atve | D| Cl OD last D| Dl D (r+) C| OLD 10.1 (0) Prunella raises peaches, Where J is the number of units of labor she uses and T isthe number of units of land she uses, her output is f(L,7) = LET? bushels of peaches. (a) On the graph below, plot some input combinations that give her an output of 4 bushels. Sketch a production isoquant that runs through these points. The points on the isoquant that gives her an output of 4 bishels oe eee ae ¢0 20 (6) This production function e: xhibits returns to seale__Conghant (constant, increasing, decreasing) (c) In the short run, Prunella cannot vary the amount of land she uses, On the graph below, use blue ink to draw a curve showing Prunella’s output as a function of labor input if she has 1 unit of land. Locate the points on your graph at which the amount of labor is 0, 1, 4,9, and 16 am label ther. ‘The slope ofthis curve is known as the marginal —_PYOOwct ot labor 55 cite ging shat Saale ty hoe loHer of labor increase?, Output 8 pr ted ine 6 Crs Hue tine 4 a CI othe asl = MPLCalculus 249 TECHNOLOGY (Ch, 19) much extra output does she (2) Assuming she has 1 unit of land, how ‘get from adding an extra unit of labor when she previously used 1 unit 2% 02 of abor? eel SOM 4 units of bor? AS =2% O24 ¢ aes ee ee result from the unit increase you know ealeulus, compute th ‘combination (1,1) and compare it with the in tbor utp, fund above Derivntive is W220L., So dle ) In the long run, Prue can change er input of land as well as Sabor "Soptose tha se incense the Se of her orchard to 1 units SF land Us edi to dna ow cure em the sph above showing Suiput asa ane of labor Input. Also we red ino daw «civ showing marginal produc of abo faction af labor input when the sinoun flan i fa at & ws and f(21,22) = 19.2 (0) Suppose 2 and x2 are used in fixed proporti min{e1, 22} (a) Suppose that 21 < 2. The marginal product for 2) is _—|_ and (increases, remains constant, dereases) YE MOINS _Constontir sx increases in x). For za the marginal product is), and (increases, remains constant, decreases)f@naada § COnSaritior sma increases in sr, The technical rate of substitution between and ay is Taf nity _—— This technology demonstrates (increasing, constant, decreasing) Lonstant — returns to sate () Suppose that f(xr1,2r2) = min{2,2} and x, = xz = 20. What is the marginal product of a small increase in 2? 0 What is the rarginal product of a small increase in z;? (‘The marginal product of 2 will (increase, decrease, stay constant) TACHASE it the amount of 22 is increased by a litle bit. 19.3 (0) Suppose the production function is Cobb-Douglas and Slee) = af/703/% (a) Write an expression for the marginal product of 21 at the point annie alg eeEE nal product of 21 (increases, (4) The mary ad crease for small inerenses in x1, holding 2 fixed. (c) The marginal product of factor 2 ix ahx " 22, and it (increases, remains constant, decreases) TMCKEASE for small increases in 22 decreases, remains constant) (@) An increase in the amount of 2 (increases, leaves unchanged, de- creases) TWCreas tie ‘marginal product of 2. (6) The technical rate of substitution between 2» and 2; i. -%a 13x , (P) Does this technology have diminishing technical rate of substitution? eee ee eS ee ee eee (g) This technology demonstrates. (increasing, constant, decreasing) TALIEASE returns to sate 19.4 (0) ‘The production function for fragles is f(K,L) = L/2+ VK, where £ is the amount of labor used and K the amount of capital used. (a) Thaw ae (oles etedee cael Ge lease to scale. ‘The marginal product of labor is COMSkaNT (constant, inereasing, decreasing). (6) In the short run, capital is fixed at d units. Labor is variable. On the raph below, use blue ink to draw outpat ara function of labor input in the short run. Use red ink to draw the marginal product of labor as a function of labor input in the short run, The average product of Inbor is defined as total output divided by the amount of labor input. Use black ink to draw the average product of labor as a function of labor input erage product of labor » the short run,242 TECHNOLOGY (Ch. 19) Fragles Kt) a Labor 19.5 (0) General Monsters Corporation has two plants for producing Juggemauts, one in Flint and one in Inkster. ‘The Flint plant produces ‘according to fr(r1,2) = min{z,,2e2) and the Inkster plant produces according to fr(es,#2) = min{2x1,22}, where 2 and 2 are the inputs. (2) On the graph below, use blue ink to draw the isoquant for 40 jugger- nauts at the Flint plant. Use red ink to draw the isoquant for producing 40 juggernauts at the Inkster plant. 80 60 40 20@ i) NAME 4s (0) Suppose that the firm wishes to produce 20 juggernauts at each plant How much of each in Seeeeetueate Beene! 'PNE will the firm need to produce 20 juggernauts at wr Xi= 20, Xo Fh =H? How much of each input will the frm need to produce 20 juggernauts at the Inkster plant? Xj 2f@ 7 Xrsdo Label with an @ on the graph, th the graph, the point representing the total amount of each of the two inputs that the firm needs to produce a total of 40 Juggernauts, 20 ot the Flint plant and 20 at the Inkster plant. the Flint pla (c) Label with a 6 on your graph the of the two inputs is needed in toto if in the Plint plant and 30 juggernauts in the Tnkster plant. Label with a ¢ the point that shows how much of each of the two inputs that the firm needs in toto if it fs to produce 30 juggernauts in the Flint plant and 10 juggernauts in the Inkster plant, Use a black pen to draw the firm's isoquant for producing 40 units of output ifit ean split production in any manner between the two plants. Is the technology available to this frm comet Ves, 19.6 (0) You manage a ctew of 160 workers who could be assigned to make either of two products, Product A requires 2 workers per unit of output. Product B requires 4 workers per unit of output Point that shows how much of each he firm is to produce 10 juggernauts (a) Write an equation to express the combinations of products A and B that could be produced using exactly 160 workers. 2At4B 2140 on the diagram below, use blue ink to shade in the area depicting the com. binations of A and'B that could be produced with 160 workers. (Assume that it is also possible for some workers to do nothing at all) B 80 60 40 20244 TECHNOLOGY (Ch. 19) (2) Suppose now that every unit of product A that is produced requires the use of d shovels as well as 2 workers and that every unit of product B produced requires 2 shovels and 4 workers. On the graph you have just rawn, use red ink to shade in the area depicting combinations of A and B that could be produced with 180 shovels if there were no worries about the labor supply. Write down an equation for the set of combinations of [A and B that require exactly 180 shoves. 2b= loo (c) On the same diagram, use black ink to shade the area that repre- sents possible output combinations when one takes into account both the limited supply of labor and the limited supply of shovels. (@) On your diagram locate the feasible combination of inputs that use up all of the labor and all of the shovels. If you didn’t have the graph, 1s would you solve to determine this point?. a a 420 <(§2 what equ (e) Ifyou have 160 workers and 180 shovels, what is the largest amount of product A that you could produce? AES wnifSieyou produce this mount, you will not use your entire suppiy of one of the inputs. Which one? WorketS row many wil be left unused? __ 7 19.7 (0) A firm has the production function f(z,y) = min{2x, 2 + y} (On the graph below, use red ink to sketch a couple of production isoquants for this firm. A second firm has the production function f(x,y) = ©-+ min{z, y}. Do either or both of these firms have constant reiurns to scale? (On the same graph, use black ink to draw a couple of isoquants for the second firm, y 40 20 10NAME. _ 25 19.8 (0) Suppose the production function has the form 19.9 (0) Suppose that the where a, b, an Production function is f(es,22) = Cage! DEA x, x43) MC are postive constanta, nn 89) = Cate («) For what postive values ofa, b, and C are there decreasing retuma toscatet.© 20 anal Otbel constant tums toseae? C0 , 21 inceningrotune to waler_C70, oth ol. (6) For what positi ve values of a,b, and Cis there decrensing marginal produet for factor 1” 0 ond _b >0 1 an ks) at (c) For what positive values of 4, b, and C is there diminishing technical rate of substitution?, Al (tiie Value. 19.10 (0) Suppose that the production function is f(x1,2r2) = (xf +23)", where a and 6 are positive constants. (a) For what positive values of a and b are there decreasing returns to scale? Old Constant returns to scale? ( rebar terscaan= am rel ab Up ier ie i oa Increasing 19.11 (0) Suppose that a firm has the production function f(¢,,2%2) = vata (a) The marginal product of factor I (increases, decreases, stays constant) ‘as the amount of factor 1 increases. ‘The marginal product, stant) INCLEASC as the of factor 2 (increases, decreases, stays constant) LACrea, th amount of factor 2 increasesthe ratio 246 TECHNOLOGY (Ch. 19) ction does not satisfy the or docre: definition of increasing ’b) This production fun: (6) This pr ing returns to scale, How can this b in uk ve Used - tin which te OMe Mea ombination of inputs such that Joubling the amount ofboth inputs will more than double the amount Xe = Find a combination of inputs will less than double output returns to seal, constant returns to scale "7 Betun + see 00 diforent_deendig on® of output such that doubling the amount of both inputs eatery (et ent 8