Question

1. Suppose that output q is a function of a single input, labor (L). Describe the...

1. Suppose that output q is a function of a single input, labor (L). Describe the returns to scale associated with each of the following production functions: (10 pts)

a. q = 2L + 2. (5 pts)

b. q = 0.5L2. (5 pts)

2. Suppose a coffee shop is producing in the short run (with its rental space and equipment fixed). The coffee shop owner has observed the following levels of production per hour corresponding to different numbers of workers: (10 pts)

Number of Workers

Cups of Coffee

1

9

2

17

3

24

4

30

5

35

6

37

a. Calculate the marginal and average product of labor for this production function, and fill out the table below. (6 pts)

L

q

APL

MPL

0

0

-

-

1

9

2

17

3

24

4

30

5

35

6

37

b. Does this production function exhibit diminishing returns to labor? Explain. (4 pts)

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