Alison lives in a small town where she plans to hire workers to help her make candy.Her production function for candy is
q = 4LK.⁵
She begins producing with K=4.The cost of capital is $50/unit.The wage depends on the amount of workers she employs.Specifically,w(L)= 10 + 2L.
a.Does Alison's production function exhibit diminishing marginal return to labor? Explain.
b.Derive Alison's short-run cost function.
c.What is the shape of Alison's Marginal Cost.
d.Does the relationship w/MP = MC hold? Show this explicitly.

Question

Quizplus · Accepted Answer

The Answer of Alison lives in a small town where she plans to hire workers to help her make candy.Her production function for candy is
q = 4LK.⁵
She begins producing with K=4.The cost of capital is $50/unit.The wage depends on the amount of workers she employs.Specifically,w(L)= 10 + 2L.
a.Does Alison's production function exhibit diminishing marginal return to labor? Explain.
b.Derive Alison's short-run cost function.
c.What is the shape of Alison's Marginal Cost.
d.Does the relationship w/MP = MC hold? Show this explicitly.

Alison Lives in a Small Town Where She Plans to Hire