Question

3. You are given the production function Y = AK ^0.4 L ^1.0.

a. What is the marginal product of labor?

b. Does this production function exhibit diminish marginal product of labor? Why?

Answer 1

From the given information in the question : Y = AK^0.4 L^1.0

(a) To calculate marginal product of labor, take the partial derivative of Y with respect to L, we get:

MPL = AK^0.4 L^1-1 = AK^0.4 L⁰ = AK^0.4 because L⁰ =1.

(b) To see whether the production exhibits diminishing marginal product of labor or not , Take the second order partial derivative of production function, then we get:

= 0 . It implies that production exhibits constant returns to factor i.e labor.