I. Production Function 1. A firm estimates its cubic production function of the

Question

I. Production Function

1. A firm estimates its cubic production function of the following form:

Q = AL3 + BL2

and obtains the following results:

SHOW ALL WORK

a. The equations for total product, average product, and marginal product are:
TP = ___________________________
AP = ___________________________
MP = ___________________________

b. The estimated values of A and B are statistically significant at the (exact) levels, ________ and
________, respectively.

c. At _______ units of labor usage, marginal product of labor begins to diminish.

When the wage rate is $300, answer the following questions:
d. Average product of labor reaches its maximum value at ________ units of labor.

e. At the output for part d, average variable cost is _______________ and marginal cost is
____________.

dependent variable: Q R-squared F-ratio pvalue on F Observations: 32 .7547 92.31 .0001 VARIABLE PARAMETER ESTIMATE STD ERROR T RATIO      PVALUE L3 -0.0016 0.0005 -3.20          0.0032 L2 0.4000 0.0950 4.21            0.0002

Explanation / Answer

a) TP=0.0016L3 + 0.4L2

AP=TP/L= 0.0016L2 + 0.4L

MP=d/dL(TP)= 0.0048L2 + 0.8L

b) A is signifacant at 0.32% while B is at 0.02%

c) d/dL(MP)=0 when L=0.8/0.0096=83.3

d)

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---