The production function of a small factory that produces and sells toys is: Q = 5√(L.K). Suppose 9 labour hours and 9 machine hours are used every day, what is the maximum number of toys that can be produced in a day? Calculate the marginal product of labour when 9 labour hours are used each day together with 9 machine hours. Suppose the firm doubles both the amount of labour and machine hours used per day. Calculate the increase in output. Comment on the returns to scale in the operation.
Introduction In economics, a production function is a mathematical relationship that shows how inputs like labour and capital are used to produce output. The given production function helps us understand how a factory that manufactures toys can utilize its resources efficiently to maximize output. This question includes both numerical computation and a discussion on the […]