Exam 5: The Production Process and Costs

Isoquants are normally drawn with a convex shape because:

Suppose the production function is given by Q = 4K + 6L.What is the average product of capital when 10 units of capital and 5 units of labor are employed?

It is profitable to hire units of labor as long as the value of marginal product:

Suppose the production function of automobiles is given by $Q = K ^ { 1 / 4 } L ^ { 1 / 4 }$ a.Show that the marginal product of any given quantity of labor increases as capital is increased. b.Suppose Japanese and U.S.automakers produce on identical isoquants with this Cobb-Douglas production function and that labor costs are higher in Japan than in the United States.Do autoworkers in Japan have a higher marginal product than American autoworkers? Explain carefully. c.Now suppose Japanese automakers produce on a different isoquant from U.S.firms,but the prices of Japanese and American cars are identical.Do Japanese or American autoworkers have a higher marginal product? Why?

The long run is defined as:

The management of Morris Industries is considering a plan to terminate a new employee.The action stemmed from documented evidence supplied by the firm's accounting department that this new employee did not add as much to the firm's overall output as did a worker hired two weeks earlier.Based on this evidence,do you agree that the latest worker hired should be fired?